Doubleline Capital’s Jeffrey Gundlach expects a US recession will start in a few months, and that the Federal Reserve will need to respond “very dramatically.” He made the comments in an interview on CNBC on Monday. Valerie Tytel reports on Bloomberg Television.

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Gundlach Warns Recession to Start in Few Months, Fed to Cut Rates

Renowned investor Jeffrey Gundlach recently sounded the alarm, warning that a recession is imminent and could hit the global economy within the next few months. Gundlach, who is the CEO of DoubleLine Capital and known for his accurate predictions, cautioned investors to brace themselves for an economic downturn, which he believes will be led by the United States.

Gundlach believes that the ongoing trade tensions between the US and China, coupled with slowing global growth, will be the primary drivers of the impending recession. He stated that the recent Yield Curve Inversion, which has traditionally been a reliable indicator of recessions, confirms his prediction.

The yield curve inversion occurs when short-term Treasury yields exceed long-term yields, and it has been a reliable harbinger of economic downturns in the past. Gundlach emphasized that the current inversion serves as a warning sign for investors and policymakers alike.

Furthermore, Gundlach expects the Federal Reserve to play a crucial role in the coming months. He believes that the central bank will cut interest rates in an attempt to mitigate the impact of the recession. The Fed has already signaled its willingness to take a more accommodative approach, with the possibility of multiple cuts this year.

Gundlach’s assertion aligns with growing market expectations of a rate cut. Many investors have already factored in at least two rate cuts by the end of 2019. The anticipation of lower rates has fueled a surge in stock markets, as investors hope that looser monetary policy will provide a much-needed boost to the economy.

However, critics argue that the central bank’s ability to combat an impending recession using traditional policy tools may be limited this time around. With interest rates still historically low, the Fed has less room to maneuver compared to previous economic downturns. This raises concerns about the potential effectiveness of rate cuts in stimulating the economy.

Given the interconnectedness of the global economy, a US recession would likely reverberate throughout the world, impacting various sectors and countries. The International Monetary Fund (IMF) recently revised down its global growth forecast, highlighting increased risks to the world economy. It warned that ongoing trade tensions, geopolitical uncertainties, and a slowdown in major economies could have severe consequences.

While Gundlach’s prediction of an upcoming recession may seem alarming, it is important to note that economic forecasts can be fallible. The timing and severity of a downturn can be challenging to predict accurately. Therefore, investors and policymakers should remain cautious and closely monitor economic indicators to make informed decisions.

In conclusion, Jeffrey Gundlach’s warning of an imminent recession within the next few months has sent shockwaves through the financial community. His analysis of the yield curve inversion, coupled with ongoing trade tensions and global slowdown, raises concerns about the state of the global economy. As investors brace themselves for potentially challenging times ahead, all eyes will be on the Federal Reserve and its actions to help mitigate the impact of the downturn.

Gundlach Predicts Imminent Recession, Anticipates Fed Rate Cuts appeared first on Inflation Protection.