The soaring U.S. budget deficit at a time interest rates are increasing may be setting the stage for fiscal trouble, according to Jeffrey Gundlach, chief investment officer of DoubleLine Capital.
“Here we are doing something that almost seems like a suicide mission,” Gundlach said Tuesday in a webcast discussing his DoubleLine Total Return Bond Fund. “We are increasing the size of the deficit while we’re raising interest rates.”
The Federal Reserve is expected to raise its benchmark rate for the second time this year and signal plans for future hikes when it meets Wednesday.
Meanwhile, the recent tax cuts and increased federal spending are setting up the U.S. deficit to balloon toward 125 percent of gross domestic product after 2030, according to DoubleLine slides citing Congressional Budget Office projections.