The U.S. economy isn’t as strong as some have been making it out to be, and the stock market stands to become increasingly challenged as Federal Reserve Chairman Jerome Powell looks to accelerate the end of quantitative easing and then raise interest rates, according to Jeffrey Gundlach, DoubleLine Capital CEO and chief investment officer.
Reiterating comments he made in September, Gundlach said Tuesday in a webcast that the economy isn’t robust. “It has the appearance of being strong because the strength comes from the stimulus, which has never been as extreme as it is right now in our time,” he explained.
The money manager cautioned investors to keep a close eye on what happens with the high-yield bond market, warning that the economy could be weakened if short-term interest rates go higher than 1%.
Despite some economists’ brushing aside concerns about the yield curve flattening at low rates, he argued that the yield curve flattening at such low rates is even more problematic than when they flatten at high rates.
See the gallery above for the top 10 predictions Gundlach made for 2022 in his latest webcast.
(Photo: Jim Lee/Bloomberg)