Jeffrey Gundlach, chief executive of DoubleLine Capital, which has the title of “New Bond King”, predicted on Tuesday (12th) that the current situation of the stock market is similar to the situation in the fourth quarter of 1999, and it may usher in 2023. A catastrophe similar to the dot-com bubble of 2000.
U.S. 2-year term with 10-year Treasury yieldThe curve has inverted several times recently, which usually signals an imminent recession.
Gundlach warned Tuesday at the exchange-traded ETF forum in Miami that the bond market is signaling “trouble ahead” that has historically been a precursor to recessions.
Gundlach doesn’t see a recession in the U.S. this year, as it will take a while to manifest, but investors should be wary of recessions.
Gundlach said the current situation in U.S. stocks is similar to that in the fourth quarter of 1999, when the Internet bubble burst in 2000.
The S&P has rallied sharply in recent years on the back of the Fed’s quantitative easing (QE) and low interest rates, but investors worried about the Russian-Ukrainian war earlier this year and the Fed’s quantitative tightening (QT) efforts to curb worsening inflation have left the index tumbling.S&P 500 IndexIt has fallen sharply since the beginning of the year.
Gundlach expects European stocks to outperform U.S. stocks, especially if a recession hits.
The US consumer price index (CPI) in March increased by 8.5% year-on-year, hitting a more than 40-year high. Gundlach expects U.S. inflation to cool this year, but remains elevated, likely to fall to around 6 percent. Gundlach said the cost of living was much higher than what was reflected in the consumer price index, and wage growth and rising rents would be important drivers of inflation this year.
Before the deadline, U.S. debt 10-year yieldUp 1.5 basis points, temporarily reported 2.742%, U.S. Treasury 2-year yield rose 2.3 basis points, temporarily reported 2.4116%, US stocksDow JonesFutures rose 0.43% to trade at 34,283.00.