Jeffrey Gundlach: Stocks at Risk, House Prices May Drop, and Recession Looms

Billionaire Investor Jeffrey Gundlach Warns of Stock Risks and Housing Market Volatility

Renowned billionaire investor Jeffrey Gundlach has recently highlighted several concerning factors that could impact the stock market and housing prices in the near future. Gundlach, the CEO of DoubleLine Capital, has expressed his preference for bonds over stocks and predicts a potential dip in US house prices as mortgage rates decline. Additionally, he warns of a possible recession that could strike as early as the second quarter of 2024.

Banking Jitters May Boost Bonds and Cause House Prices to Drop

According to Gundlach, the recent regional-banking crisis has led many individuals to withdraw their funds from bank deposits and invest in money-market funds instead. While this influx of money into financial markets could be seen as positive for stocks, Gundlach disagrees. He believes that the risk appetite required for such a significant shift in investment strategy is unlikely and expects bonds, especially safe ones like Treasuries, to benefit more.

US Housing Market Freeze and Potential Weakening of Home Prices

Gundlach also addressed the current state of the US housing market, which has experienced a significant slowdown this year. Prospective buyers are hesitant to take on mortgage rates above 7%, while potential sellers are waiting to list their homes in order to retain the lower rates they secured. Gundlach suggests that if mortgage rates were to fall by around 1%, it could lead to a weakening of home prices as more supply becomes available. This scenario would be contrary to the usual trend observed over the past four decades.

Concerns Over National Debt and Rising Interest Costs

Another issue raised by Gundlach is the alarming level of national debt. He warns that interest payments could reach approximately 20% of federal tax revenue within the next five years. Gundlach points out that during recessions, the US government historically runs budget deficits to stimulate the economy, resulting in higher interest rates. This, in turn, could lead to a significant increase in debt payments.

Predictions of a Prolonged Economic Slump and Possible Recession

Gundlach reiterates his belief that a prolonged economic slump is on the horizon. He highlights the inverted yield curve, which has historically preceded recessions, and warns that it may reinvert soon. Additionally, he points to the Philadelphia Fed's coincident economic indicators, which have reached levels typically associated with impending economic trouble. Based on these indicators, Gundlach predicts the likelihood of a recession in the second quarter of the coming year.

In conclusion, Jeffrey Gundlach's insights and predictions offer valuable insights into the potential risks facing the stock market, housing prices, and the overall state of the economy. As an experienced investor, his expertise and track record make his warnings worth considering. It is crucial for individuals and businesses to stay informed and prepared for potential market fluctuations and economic downturns.—————————————————————————————————————————————
By: tmohamed@insider.com (Theron Mohamed)
Title: Jeffrey Gundlach: Stocks at Risk, House Prices May Drop, and Recession Looms
Sourced From: markets.businessinsider.com/news/stocks/stock-housing-market-outlook-gundlach-doubleline-house-prices-recesion-debt-2023-12
Published Date: Mon, 11 Dec 2023 11:42:12 +0000