DoubleLine’s Gundlach Predicts Interest Rates Will Decline Amid Deteriorating US Economy

DoubleLine Capital CEO Jeffrey Gundlach predicts that interest rates are likely to decline as the U.S. economy continues to weaken, potentially entering a recession in early 2024, according to an interview he gave on CNBC.

Gundlach emphasized that the market will eventually need to face the reality that current interest rates and the ongoing deficit are not sustainable. His remarks followed the Federal Reserve’s decision to maintain interest rates, while leaving open the possibility of future increases. The Fed’s policy statement recognized the unexpected resilience of the U.S. economy, while also acknowledging the stricter financial circumstances impacting both businesses and households.

He suggested that if the economy deteriorates, the central bank might cut rates significantly—by as much as 200 basis points—rather than a smaller adjustment of 50 basis points. Gundlach warned that rising interest expenses could contribute to the next potential financial crisis.

“I really believe that layoffs are coming,” he stated, predicting a noticeable rise in the unemployment rate.

In his investment outlook, Gundlach expressed a preference for Treasury bills over cash and projected that the yield on the 10-year Treasury will likely remain the same by the end of next year.