Billionaire Jeffrey Gundlach, aka “The Bond King,” predicts that the Federal Reserve will soon cut rates significantly.” A “red alert recession signal,” he added, noting that all U.S. Treasury yields since the two-year have been “well below the fed funds rate.
DoubleLine CEO on Fed Rate Cuts and Recession
Jeffrey Gundlach, chief executive officer and chief investment officer of investment management firm DoubleLine, expects the Federal Reserve to cut interest rates significantly in the near future. Gundlach is known as the “Bond King” because he was featured on the cover of Barron’s in 2011 as the “New Bond King.” According to Forbes, his net worth currently stands at $2.2 billion.
The billionaire tweeted on Friday:
The Federal Reserve is expected to cut interest rates significantly soon.
But he cautioned: “I have a 30% chance of being wrong, so take that into account in your decision.”
The Federal Reserve raised interest rates by 25 basis points (bps) this week despite the banking crisis. Fed Chairman Jerome Powell said he does not expect the Fed to cut rates this year.
“The 2-year UST (U.S. Treasury note) versus the 10-year is now inverted by 40 basis points. Just a few weeks ago it was 107 basis points; all yields since the 2-year UST have been well below the fed funds rate,” Gundlach explained in a follow-up tweet. Yield curve inversions occur when the yield on short-term Treasuries exceeds the yield on long-term Treasuries. The DoubleLine executive emphasized:
Red Alert Recession signal.
Gundlach recently said that this rate hike would be the Federal Reserve’s last; in February, the billionaire warned of painful consequences in the next recession.
Many want the Federal Reserve to cut interest rates. Elon Musk, CEO of Tesla and Twitter, tweeted last Friday that the Fed is “operating with too much data lag” and that “rates need to be lowered immediately.” Like Gundlach, Galaxy Digital CEO Mike Novogratz also expects the Fed to cut rates “sooner than we think.”
Noted economist David Rosenberg warned last week of a “crash landing” and recession. Economist and gold bug Peter Schiff said this week that inflation will be even worse and that the cost of living for Americans will not rise significantly.
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