Billionaire ‘Bond King’ Jeffrey Gundlach Predicts the Fed Will Cut Rates Substantially Soon
Billionaire Jeffrey Gundlach, aka the “Bond King,” has predicted that the Federal Reserve will be cutting interest rates substantially soon. “Red alert recession signals,” he added, noting that all U.S. Treasury yields two years and out are “well below the fed funds rate.”
Doubleline CEO on Fed Rate Cuts and Recession
Jeffrey Gundlach, chief executive and chief investment officer of investment management firm Doubleline, expects to Federal Reserve to cut interest rates substantially soon. Gundlach is nicknamed “the Bond King” after he appeared on the cover of Barron’s as “The New Bond King” in 2011. According to Forbes, his net worth is currently $2.2 billion.
The billionaire tweeted Friday:
I predict the Federal Reserve will be cutting rates substantially soon.
However, he cautioned: “I am wrong about 30% of the time so factor that into any decision making.”
The Federal Reserve raised interest rates by 25 basis points (bps) this week despite the banking crisis. Fed Chairman Jerome Powell said he does not expect the Fed to cut interest rates this year.
“UST [U.S. Treasury] 2 year versus 10 year is now inverted 40 basis points. Was 107 basis points just a few weeks ago. All UST yields two years and out are well below the fed funds rate,” Gundlach explained in a follow-up tweet. A yield curve inversion occurs when yields on shorter-dated Treasuries rise above those for longer-term ones. The Doubleline executive stressed:
Red alert recession signals.
Gundlach recently said that the latest interest rate hike would be the Federal Reserve’s last increase. In February, the billionaire warned of painful outcomes in the next recession.
Many people want the Federal Reserve to cut interest rates. Tesla and Twitter CEO Elon Musk tweeted last Friday that the Fed is “operating with way too much latency in their data,” noting that interest rates “need to drop immediately.” Like Gundlach, Galaxy Digital CEO Mike Novogratz also expects the Fed to cut interest rates “sooner than we think.”
Meanwhile, a number of people are predicting a severe recession in the U.S. Famed economist David Rosenberg warned of a “crash landing” and a recession last week. Economist and gold bug Peter Schiff said this week that inflation is about to get a whole lot worse, nothing that Americans’ cost of living is going to go way up.