Gundlach Bearish on Economy, Sees 'QE Lite'

On the macroeconomic scene, Gundlach reiterated his view that chances of a U.S. recession are 75% before the November 2020 presidential election. Once a recession does come, Gundlach predicts that there will be an explosion in the national debt.

Gundlach also warned of the recession likelihood last week, citing signals including the August yield-curve inversion that has re-steepened this month.

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Here are some other highlights from the webcast:

• “It’s not a great idea to be betting on lower interest rates.” He added that investors have probably seen the low of the year in benchmark 10-year yields, which sank to a multi-year low of 1.42% earlier this month.
• Fed policy makers will probably say as little as possible at Wednesday’s meeting. “I can guarantee you won’t hear ‘mid-cycle adjustment’ from Jerome Powell and the Fed” on Wednesday, he said.
• Gundlach put the chances of a U.S.-China trade deal before the 2020 U.S. presidential election at almost zero. He said China has no incentive to make a deal before the election.
• Bad news for the U.S. dollar: the next big move for the currency is down, Gundlach said, adding that investors should be diversifying into other currencies and markets.
• He’s also less positive on gold in the short-term. But for a permanent portfolio position, gold should be held, he said, adding that “now is the time to be looking for a better buying opportunity in gold.
• If the Democratic primaries were held today, Gundlach said he thinks Elizabeth Warren would win the presidential nomination. “It’s not going to be Joe Biden.”

–With assistance from Melissa Karsh.)