This billionaire warns that key 'economic indicators' predict likely downturn for the the US before the 2020 election
It’s not a question of whether or not the U.S. will eventually have another recession —it’s a question of when, and how severe it will be. And according to Wall Street billionaire Jeffrey Gundlach, CEO of DoubleLine Capital, the chances of a recession occurring by the 2020 election are 75%.
One of the key indicators of a coming recession, Gundlach told Yahoo Finance, is the yield curve — which compares long-term and short-term interest rates. An inverted yield curve means that short-term interest rates are higher than long-term interest rates for financial products such as certificates of deposit and bonds — and right now, the yield curve is inverted.
If the yield curve becomes even steeper, Gundlach warned, “That would almost seal the fate of recession coming. It’s not so much the inversion; the inversion is a warning that there’s one coming. But you start to get in the imminence category once it first starts steepening out from the inversion because by then, the Fed has realized it’s behind the curve. The market knows it too, and everybody knows the Fed’s going to be slashing interest rates.”
In fact, the Federal Reserve recently announced its first interest rate cut since the Great Recession. Since 2015, the Fed had been gradually raising interest rates.
According to Gundlach, “Leading economic indicators are heading south in a hurry…. You’re starting to see some warning signs from sentiment surveys, from CEO sentiment a little bit. And there’s a flashing signal from consumers’ expectations of the future being much worse than thoughts of the present.”