Zinger Key Points
- Indicators including ISM new orders and the purchasing managers’ index appeared to be signaling a downturn, he said.
- The famed investor pointed out that ISM supplier delivery delays are near their lowest levels in 30 years.
- Gundlach also highlighted the inversion of 2-year and 10-year Treasury note yields.
DoubleLine Capital CEO Jeffrey Gundlach reportedly said on Tuesday it looks increasingly possible the United States will tip into a recession.
"It's pretty clear that we have the look of soon to be at the front end of a recession," Gundlach said during a DoubleLine investor webcast, according to a CNBC report. He added that indicators including ISM new orders and the purchasing managers' index appeared to be signaling a downturn.
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The famed investor and bond expert pointed out that ISM supplier delivery delays are near their lowest levels in 30 years, showing greater supply than demand, which further shows signs of a weak economy. He also highlighted the inversion of 2-year and 10-year Treasury note yields, where shorter-dated bills yield more than longer-dated ones, indicative of the chances of a recession.
Gundlach's take stands in contrast to Goldman Sachs' prediction about the economy. The investment bank has revised its estimate about the U.S.' chance of entering a recession over the next 12 months, reducing its judging probability from 35% to 25%.
On Fed: Gundlach's comments come at a time when market participants are keenly awaiting the Federal Reserve meeting outcome next week along with the release of the inflation data. "We're at very low unemployment. That is what is keeping the Fed on the snugger side," he said.
Goldman Sachs has factored in a further 25-basis-point rise, expected to take effect in July.
Preferred Portfolio: Gundlach also highlighted his preferred portfolio mix right now consists of 30% stocks, 60% bonds and 10% real assets. In terms of real assets, the investor said he favors gold, even though he's now less bullish compared to earlier times.
Spot gold was trading 0.03% higher at $1,963 per ounce during Wednesday morning Asian trading session. The SPDR Gold Trust GLD and the iShares Gold Trust IAU gained 0.11% on Tuesday, according to Benzinga Pro.
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