- A potential "calamity" is coming for markets in 2023 and a recession is likely, Jeff Gundlach has warned.
- The DoubleLine Capital boss told the Exchange ETF conference the bond market is a warning signal for investors.
- Worries about a US recession are intensifying, as the Fed prepares to hike rates aggressively.
DoubleLine Capital CEO Jeff Gundlach has said a "calamity" is potentially coming for markets in 2023 and that he thinks a recession is likely to hit the US economy.
Speaking at the Exchange ETF conference in Miami, Gundlach said: "I would say there's potentially a calamity coming in 2023."
He said he doesn't expect a recession to come this year, but said he's on the lookout after the inversion of 2-year and 10-year US bond yield, which is traditionally a warning sign for the economy.
"I'm not looking for a recession this year because it takes time," he told the conference in the keynote speech. Gundlach later told CNBC that the recession "might not be until 2023."
Gundlach, nicknamed the 'Bond King' for his successful career in fixed income, has long warned the Federal Reserve has let inflation get out of control. And he has cautioned that sharp interest rate rises are likely to dent the economy.
Investors by and large expect the Fed to hike interest rates sharply this year, with a 50-basis point increase in May. Economists at Citigroup expect 50-basis point increases in May, June, July, and September, which would be a rapid tightening of monetary policy by historical standards.
The bond market has been flashing warning signals about US growth. Yields on 2-year Treasury notes have briefly risen above those on 10-year notes in recent weeks, suggesting investors think growth will be lower in the future.
Gundlach said the 2-year Treasury was a highly reliable economic indicator. "The Fed should be replaced with the 2-year Treasury," he said. He also called out the Fed's belief that inflation would fade, saying: "The only thing that was transitory was the use of the word transitory."
The DoubleLine boss told CNBC he thinks stocks are well overvalued and that the tech-heavy Nasdaq index was set for a rough time, after a sharp rise that has looked similar to the dotcom bubble of 1999.
Far from all investors are convinced that the US is headed for a recession, however, with many economists arguing that a strong jobs market and high levels of savings should boost growth.
But the warnings are growing louder. Deutsche Bank last week became the first major lender to predict a recession, saying one "will be needed to take sufficient steam out of the economy and labor market to bring inflation back down."
