Adam Jeffery | CNBC
DoubleLine Capital CEO and longtime bond investor Jeffrey Gundlach said Wednesday that the odds of a recession before the 2020 presidential election are rising.
Among Gundlach’s myriad indicators signaling a greater chance of recession is a measure of consumer sentiment.
He explained said the metric he looks at shows consumers feel more and more grim about the future but still feel OK about the present, a divergence that typically occurs before recessions. Gundlach also mentioned ISM manufacturing readings showing a contraction as suggestive of a future downturn.
“What happens before recession every time in a very convincing pattern is that first consumers start to feel bad about the future. They say ‘the future looks worse than how I feel about the present.’ And that started a while ago now, where the view of the future was much grimmer than the view of today,” Gundlach said.
The so-called bond king said in a webcast Tuesday evening that interest rates have bottomed for the year after a precipitous fall in August. That prediction echoed what lieutenant and DoubleLine Chief Investment Officer Jeffrey Sherman told CNBC.com earlier in September.
“Although there was this big momentum rally, they tend to come in bursts. And usually when you have these big movements, the bond market — like the stock market, like the credit market — tends to overshoot in both directions,” Sherman said on Sept. 6.
“We’re not convinced that if we have a recession today the bond market rallies significantly from here,” he added. “That’s always the assumption, but we have rallied a lot and there is a lot of negative news priced into the rates market.”
DoubleLine actively manages clients’ money and has more than $140 billion in assets under management, according to the firm’s website.
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