Elite investor Jeffrey Gundlach says to prepare for a recession by avoiding stocks, setting aside some cash

Jeffrey Gundlach.Richard Drew/AP

  • Jeffrey Gundlach is cautious about stocks at current valuations and predicts a recession.

  • The elite investor said an inverted yield curve and leading economic data portend problems ahead.

  • The CEO of DoubleLine Capital is setting aside cash to buy bargains in markets such as India and Japan.

Billionaire investor Jeffrey Gundlach prefers holding cash to buying stocks at high prices, arguing that a recession is inevitable. Tell Fox Business Network this week.

“I’m skeptical about valuations, skeptical about how prosperous the market is, so I want to have cash now to deploy after the coming recession,” he said.

The S&P 500 rose 24% last year and another 3% this year, to all time highTechnology stocks led the gains, with Nvidia shares more than quadrupling since the start of last year, boosting its market value to Record $1.5 trillion.

“We’re at a valuation stage in the stock market where I think you have to start taking the long term and skipping the end of the boom game because I think valuations are very, very high,” Gundlach said. As the global economy slows and valuations decline, he advised investors to set aside some cash to buy stocks in India, Japan and other countries.

The DoubleLine Capital CEO, nicknamed the “Bond King,” has labeled an inversion and then de-inversion of the yield curve as a reliable recession indicator. He pointed out that the 10-year Treasury yield fell below the 2-year Treasury yield more than 18 months ago, and the gap between the two has narrowed sharply in recent months.

“When you start to undo the inversion, you really have to be wary of a recession,” Gundlach said. “In fact, more than 80 weeks after the yield curve was inverted, a recession hasn’t come yet — and to say it’s not coming is very bad.” logic.” because de-reversal is happening. “

Gundlach pointed out leading economic index, a group of forward-looking indicators, has declined for 21 consecutive months as evidence of trouble ahead. He also noted that most U.S. states have reported rising unemployment rates over the past six months.

Against this backdrop, the fund manager is encouraging the Fed to cut interest rates this year from almost zero to more than 5%, saying current borrowing costs are too high on both a real and inflation-adjusted basis. , interest rates that are too high will lead to the Federal Reserve cutting interest rates. It has become extremely painful for the government to pay the interest due on the national debt.

Gundlach warnEarlier this month, he said the S&P 500 looked like a “terrible trade” and that a disappointing earnings season could weigh on the index. He also said that a recession is very likely and that labor hoarding could eventually lead to a wave of layoffs.

Read the original article business insider

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