Jeffrey Gundlach: 9 Signs Pointing to Near-Term Gloom

Related: Jeffrey Gundlach: 10 Troubling Economic Signs to Watch

The U.S. economy is weakening and likely will enter a recession by early 2024 if not sooner, DoubleLine Capital CEO Jeffrey Gundlach predicted on a webcast Tuesday.

The billionaire investor, citing data from multiple sources, pointed to several signs the economy is slowing, although he said a recession hasn’t arrived yet.

The percentage probability for recession appears to be growing, Gundlach said.

At the same time, inflation should continue to decline, he said. The M2 money supply — the Federal Reserve’s measure of how much cash is in circulation, checking and savings accounts and short-term savings vehicles — is at its lowest levels since the Great Depression, which takes pressure off inflation, Gundlach noted, adding that he expects inflation to remain above the Fed’s 2% target.

While Gundlach focused heavily on economic data, he also made observations about the markets, noting his suggested investment portfolio allocation stands at roughly 30% stocks, 60% bonds and 10% real assets, namely gold.

Higher yields in high-quality bonds make bonds cheap versus stocks now, according to Gundlach.

Bonds and bond funds offer “a much more relaxing way of earning returns than white-knuckling it in a stock market and economy that’s perhaps going into recession,” he said. (Gundlach said he has more than “nine figures” of his own money in the DoubleLine Total Return Bond Fund.)

Among other points, Gundlach said it’s a good time to own longer-duration bonds, which should rally in a recession, at least initially, and it’s also an appealing time to own agency mortgage-backed securities.

The high-yield bond market is vulnerable to recession but its quality is better than at any time in decades, he said. Gundlach said he doesn’t like commodities (except for gold) because the economy is weakening.

See the gallery for nine gloomy signals cited by Gundlach.

(Image: Bloomberg)