International Bad News from the US, “King of Bonds” Warns of Early Recession in 2024 News – 3 hours ago

Jakarta, CNBC Indonesia – DoubleLine Capital CEO, Jeffrey Gundlach, believes interest rates will tend to fall due to the worsening economy of the United States (US). This points to an impending recession as early as 2024.

“I think interest rates will fall when we enter a recession in the first half of next year,” said Gundlach on Wednesday (1/11/2023), as quoted CNBC International.

The so-called “bond king” is showing few signs of an economic slowdown. The first is the unemployment rate. Even though it is still low, this figure tends to increase.

Another recession signal is the spread between US 2-year and 10-year Treasury yields, which has remained inverted for more than a year, and has recently begun to rise. He also saw the start of a wave of layoffs.

“I’m very confident that layoffs will happen,” Gundlach said. “We’ve seen hiring freezes, and now we’re starting to see layoff announcements… those announcements are out there (for) financial companies and technology companies, and I’m sure this will spread.”

Gundlach also sounded the alarm over the rising federal deficit, which ballooned to nearly $1.7 trillion at the end of the fiscal year that ended last September. The budget shortfall adds to the US debt, which has reached almost US$34 trillion.

“One thing the market has to face is that we can’t sustain these interest rates and deficits for much longer,” Gundlach said. “We cannot afford the government we run at current interest rates. This is simply unsustainable.”

Regarding the next steps of the US Central Bank, the Fed, Gundlach said the central bank would not be as aggressive as signaled dot plot today, which suggests another rate hike this year.

Billionaire investor Stanley Druckenmiller on Wednesday morning also voiced similar concerns about government spending. He said that the US had chosen not to issue long-term, low-interest rate debt in recent years.

This, he said, will ultimately lead to difficult choices in the future. Such as cutting entitlement programs including Social Security.

For your information, the Federal Reserve’s interest rate setting committee on Wednesday agreed unanimously to maintain the main federal funds interest rate in the target range of between 5.25% to 5.5%, which has been set since July.

This is the second meeting in a row in which the central bank chose to keep interest rates static, after a series of 11 rate hikes, including four in 2023.

Fed Chair Jerome Powell himself said that the interest rate setting committee had not yet begun considering lowering interest rates, and that would not happen until inflation was under control.

[Gambas:Video CNBC]

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