As increased interest rates put pressure on American consumers and businesses, Jeffrey Gundlach, the CEO of investment management firm DoubleLine Capital, stated on Thursday that he believes a U.S. recession may occur as soon as this year.
He noted that indicators of impending economic distress in the United States, such as an increase in credit card delinquencies and worse retail sales figures, point to a greater likelihood of an impending economic recession than an inflationary recovery.
"There's a lot of recessionary signals out there," he said during a webinar that Rosenberg Research's founder and president, David Rosenberg, was hosting. "There's more of a recessionary feel than an inflationary feel," he stated.
The money manager, known by many as "the bond king," stated that he was avoiding the riskiest segments of the corporate debt market, such as investments in private credit and bonds from triple-C rated corporations, since he anticipated a sharp increase in company defaults.
Regarding private credit in particular, he warned that in the event of a severe economic downturn, investors seeking greater returns in private markets rather than public debt markets face the danger of being stranded with illiquid assets.
Right now, there isn't a single characteristic that makes private credit appear superior than public credit. It's the worst, it has less reward, and it's riskier," he said.
However, he said that DoubleLine has a significant exposure to US government debt despite worries about the country's debt load increasing and the skyrocketing interest payments on that debt due to rising interest rates. "We have more Treasuries now in our strategies than we've ever had," Gundlach stated.
However, an increasing debt load over time could necessitate an unprecedented debt restructuring of the US government.
"I've got this crazy idea that I want buy only the lowest coupon Treasuries ... because if I have a very low coupon Treasury I don't have to worry about being restructured," he stated. "I worry that the federal government might be forced to restructure the Treasury debt."
(Source:www.usnews.com)
He noted that indicators of impending economic distress in the United States, such as an increase in credit card delinquencies and worse retail sales figures, point to a greater likelihood of an impending economic recession than an inflationary recovery.
"There's a lot of recessionary signals out there," he said during a webinar that Rosenberg Research's founder and president, David Rosenberg, was hosting. "There's more of a recessionary feel than an inflationary feel," he stated.
The money manager, known by many as "the bond king," stated that he was avoiding the riskiest segments of the corporate debt market, such as investments in private credit and bonds from triple-C rated corporations, since he anticipated a sharp increase in company defaults.
Regarding private credit in particular, he warned that in the event of a severe economic downturn, investors seeking greater returns in private markets rather than public debt markets face the danger of being stranded with illiquid assets.
Right now, there isn't a single characteristic that makes private credit appear superior than public credit. It's the worst, it has less reward, and it's riskier," he said.
However, he said that DoubleLine has a significant exposure to US government debt despite worries about the country's debt load increasing and the skyrocketing interest payments on that debt due to rising interest rates. "We have more Treasuries now in our strategies than we've ever had," Gundlach stated.
However, an increasing debt load over time could necessitate an unprecedented debt restructuring of the US government.
"I've got this crazy idea that I want buy only the lowest coupon Treasuries ... because if I have a very low coupon Treasury I don't have to worry about being restructured," he stated. "I worry that the federal government might be forced to restructure the Treasury debt."
(Source:www.usnews.com)