Billionaire Investor Gundlach Warns Of S&P 500 Risks, Predicts 75% Chance Of Recession: 'Pretty Lousy Trade Location To Own Stocks'

In a recent public webcast, Jeffrey Gundlach, CEO of DoubleLine Capital and billionaire investor, expressed concerns about a potential recession and a downturn in the S&P 500.

What Happened: Gundlach held a bearish stance on the market, indicating the S&P 500 is a less-than-ideal investment presently, Business Insider reported on Tuesday. The so-called Magnificent Seven stocks are expected to underperform compared to the broader market, according to his forecast.

“Rich enough for sure is the S&P 500. We’ve retraced all the way back up to a double top. Almost exactly two years later, we’re basically at the same place. This looks like a pretty lousy trade location to own stocks.”

The DoubleLine Capital CEO also projected a 75% chance of a recession happening this year. He further predicted inflation, unemployment, and interest rates to reach higher levels than most Wall Street estimates.

“If we get into recession this year, the unemployment rate will, per usual, go vertical. That’s because once you start getting layoffs, you have an environment where it’s okay to lay people off,” said Gundlach.

He pointed out that the U.S. has not outperformed in 2023, a trend that has been consistent globally for nearly two years. He also cautioned about the possible underperformance of high flyers, such as the Magnificent Seven, suggesting a trend shift.

Gundlach also alluded to a potential recession that could severely impact the dollar’s value and lead to the underperformance of the S&P 500. He referred to a historical link between the strength of the dollar and the performance of the S&P 500.

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Finally, he restated his concerns about the escalating federal debt, asserting that the forthcoming recession could intensify this problem.

Why It Matters: Gundlach’s prediction for a 2024 recession aligns with his previous statement in December after the Federal Reserve decided to maintain interest rates. He had termed the forecast as “pretty dovish.”

Earlier that month, investment firms BMO Capital Markets and Deutsche Bank AG had also predicted a recession despite consensus on continued growth and healthy stock gains.

In November, Gundlach also said that although Consumer Price Index inflation should decrease, the U.S. economy might face a recession in early 2024.

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