Gundlach Predicts U.S. Recession in 2024, Hints at Potential Rate Cut

Jeffrey Gundlach, the founder of DoubleTree, shared his perspectives on the U.S. economic landscape and the Federal Reserve’s monetary policy during an appearance on CNBC’s “Closing Bell” on Wednesday. The prominent bond strategist cautioned about a potential U.S. recession in 2024, even as he predicted a decline in the Consumer Price Index (CPI) inflation.

Given the current deflationary trends, Gundlach suggested that the Federal Reserve may have the latitude to contemplate lowering interest rates. He pointed out that the central bank has not ruled out future actions and expects a less aggressive stance in its projections should inflation continue to decline.

After Jerome Powell’s press conference earlier in the day, the SPDR S&P 500 Trust ETF experienced an increase of over 1%. Gundlach interpreted Powell’s cautious tone as dovish, which contributed to a bond rally following a previous sell-off. He reaffirmed that the likelihood of a U.S. recession is significant, suggesting that interest rates should decrease in the face of such an event.

Gundlach voiced additional concerns about the possibility of a recession leading to a potential rate cut in 2024. The Federal Reserve has held the federal funds rate steady at 5.25%-5.5% after implementing 11 rate hikes. Indicators pointing to an economic slowdown, such as rising unemployment and the ongoing inversion of the 2-year and 10-year Treasury yields, lend credence to his outlook.

He also highlighted the rising federal deficit, which is approaching $1.7 trillion, and its contribution to the overwhelming $34 trillion U.S. debt. Gundlach stressed the urgent need for either a reduction in interest rates or a decrease in the deficit, although both seem unlikely given the Fed’s sustained high-rate policy and ongoing military engagements.