Gundlach, Bartiromo Talk Rates, Recession, Election

DoubleLine Capital Founder and CEO Jeffrey Gundlach speaks May 20 with FOX Business Network anchor Maria Bartiromo on his outlook for the Federal Reserve’s monetary policy path, including “a little bit greater chance of two rate cuts” in 2024 (0:17), his expectation of recession starting if not this year, then in 2025, and the presidential election. Highlights:

0:49 - Components within the Consumer Price Index that have been driving inflation, including auto insurance, homeowners’ insurance and shelter, and components that are less relevant to most people’s cost of living such as used-car prices.

2:07 - How unprecedented fiscal stimulus and the resultant unprecedent expansion of M-2 monetary supply in 2020-2022 extended the lag between restrictive monetary policy and leading recessionary signals vs. the actual advent of recession.

2:51 - Mr. Gundlach’s expectation of recession, based on, among other factors, negative growth spreading over the past month into more sectors of the economy.

3:51 - Nascent awareness by the financial markets of the federal deficit and national debt spirals, developments whose implications include “higher for longer” interest rates, another precursor for recession. “Higher for longer” might not threaten some big businesses, but Jeffrey Gundlach notes “small and medium businesses that used to borrow at 4% on a 90-day revolver have rolled over 11 times to higher rates. Now they’re up around 10%. And every time, every month, every quarter that you're paying that sort of a rate, it eats into the cash position. You're going to take out some of these companies.”

4:38 - Election year 2024, prospective policies under a future Trump administration and the absence of a “policy North Star” in the Biden administration. “It seems that the opinions change and the policies change depending upon whether an issue polls at 55% or 45%. And I think people are realizing this back and forth on the energy policy, the back and forth on the Mideast policy, the claim that the border’s secure, now it’s not secure. I think people don't like being gaslit. and I think the reason that the favorability ratings of the current administration – the vice president, the president – are 40 or lower is because people don't like the fact that it's vacillating. It's not a policy. It’s a vacillation based upon how well something’s polling. I know that all politicians do that, but this is this is pretty, blatant.”

6:48 - The Biden administration’s policies on Israel and Hamas, including its withholding of weapons deliveries to Israel. “It’s like the administration has one foot on the dock and one foot on the canoe, and they keep drifting further apart.”