Jeffrey Gundlach sees higher chance of downturn as economic indicators look 'full on recessionary'

Published Tue, Jun 6 20235:58 PM EDTUpdated Tue, Jun 6 20236:19 PM EDT

DoubleLine Capital CEO Jeffrey Gundlach said Tuesday that it looks increasingly likely the U.S. will tip into a recession. The noted fixed income investor, whose firm managed $92 billion at the end of 2022, pointed to the U.S. leading the index of 10 economic indicators from the Conference Board, saying it looks "absolutely full on recessionary." "It's pretty clear that we have the look of soon to be at the front end of a recession," Gundlach said during a DoubleLine investor webcast, adding indicators including ISM new orders and the purchasing managers' index appeared to be signaling a downturn. Gundlach's recession call is the opposite from Goldman Sachs' updated forecast Tuesday, which showed chances the economy can avoid a recession are higher now that a banking crisis has largely passed. The widely followed investor also highlighted the inversion of 2-year and 10-year Treasury note yields, where shorter-dated instruments yield more than longer-dated ones. The yield-curve inversion has been a reliable recession predictor and signs of a reversal could be indicative of an imminent economic downturn. Meanwhile, Gundlach said ISM supplier delivery delays are near their lowest levels in 30 years, showing greater supply than demand, which further indicates a weak economy. The labor market has held up well, however, with nonfarm payrolls increasing 339,000 in May even with a 0.3 percentage point increase in the unemployment rate to 3.7%. Separate surveys, of businesses and households, account for the divergent numbers. "We're at very low unemployment. That is what is keeping the Fed on the snugger side," Gundlach said. The Federal Reserve has raised benchmark interest rates 10 times since March 2022 to fight inflation. Some policymakers have indicated a willingness to take a break in June from the succession of hikes as they look to see what effect the policy tightening so far is having on the economy. Gundlach said his preferred portfolio mix right now consists of 30% stocks, 60% bonds and 10% real assets. In terms of real assets, Gundlach said he favors gold, even though he's now less bullish than he was.