Billionaire Investor Jeff Gundlach Warns of a Recession As Bonds Crash

• It’s time to start worrying about a recession in the US, according to Jeff Gundlach.
• Soaring bond yields signal that a downturn is coming, the DoubleLine Capital founder said.
• “If the unemployment rate ticks up just a couple of tenths it will be recession alert,” Gundlach wrote on X. “Buckle up.”

Bond-market turmoil could be a sign that a recession is on the way, Jeff Gundlach has warned.

The DoubleLine Capital founder said Tuesday that a severe economic downturn is becoming more likely, pointing to the narrowing spread between 2-year and 10-year US Treasury yields.

“The US Treasury yield curve is de-inverting very rapidly,” Gundlach wrote in a post on X.

That “should put everyone on recession warning, not just recession watch,” he added. “If the unemployment rate ticks up just a couple of tenths it will be recession alert.  Buckle up.”

Longer-term bond yields have spiked in recent weeks, with investors ramping up bets that the Federal Reserve will keep interest rates high for much of 2024 in a bid to crush inflation. 

That’s led to the gap in returns offered by 2- and 10-year Treasurys narrowing to just 33 basis points, for the tightest yield curve since late March.

The yield curve being inverted – as it has been for the past 226 trading sessions – has been a harbinger of every US recession since 1969, according to data from the London School of Economics.

The curve tends to de-invert just before a recession actually strikes.

Gundlach isn’t the only voice on Wall Street warning that the rapid bond-market sell-off is stoking economic turmoil.

On Monday, JPMorgan Asset Management’s David Lebovitz said that the risk of a “financial accident” is increasing as fixed-income yields spike – and predicted the Fed will eventually have to slash interest rates to prevent stock-market chaos.