Jeffrey Gundlach Talks with CNBC's Scott Wapner on Sept. 21 FOMC Day

In a Sept. 21, 2022, interview with CNBC’s Scott Wapner, DoubleLine CEO Jeffrey Gundlach among other topics discusses the bond market’s recessionary reaction (1:45) to Federal Reserve Chair Jerome H. Powell’s hawkish news conference and Mr. Gundlach’s criticisms that the Fed (4:38) acted too late on inflation and now is at high risk of overtightening with the projected odds already 75% that the U.S. economy enters a recession in 2023.

U.S. stocks (7:28), Mr. Gundlach says, are likely headed for a slide that should take the S&P 500 down to 3400 and “if things get really bad, down around 3000.” A reverse image appears in the bond market in the wake of a dramatic rise in yields and credit spreads. For conservative investors (8:32), Mr. Gundlach says it is possible to generate high single-digit returns by investing “in almost no-risk securities in the bond market.” Turning to riskier parts of the bond market, he says closed-end fixed income funds offer the potential for 20% returns for the next two or three years.

Mr. Wapner and Mr. Gundlach turn to further discussion of the Fed and the state of the economy (12:35). Citing an inverted U.S. Treasury yield curve, negative consumer sentiment and a collapse in home affordability, Mr. Gundlach warns, “I think the economy is weaker than people think.” Asked by Mr. Wapner for his level of confidence in the Fed’s forecasting, Mr. Gundlach replies, “I have very little confidence. Their record is very poor. A year ago, there was an expectation for something like 25 or 50 basis points of rate increases this year. That came out of the Fed and other people. We’ve just blown that out of the water. Inflation ‘transitory.’ I don’t think so. We’re coming on almost two years of inflation being transitory.”

The severity of the probable recession (17:22), according to Mr. Gundlach, could depend on the Fed. “I think if the Fed slowed down on interest rate increases, it could potentially be shallow. If they follow the dot plots, I think it’s going to be fairly deep.” Unfortunately, Chair Powell in his Sept. 21 news conference reiterated his determination to tighten monetary policy until he has seen sustained evidence of declining inflation. Citing the leading indicators as well as the behavior of the securities markets and housing, which are all showing economic weakness, Mr. Gundlach says, “When that gets joined by more real-time economic activity deteriorating, it’s going to be too late.”

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