Analyst Says Recession Chance Higher Than 50%, Musk's DOGE Cuts to 'Knock Out' GDP — 'We're 'Getting Closer to Recession'

Stock markets worldwide are seeing a major selloff following President Donald Trump's sweeping new tariffs announced on April 2. An increasing number of market experts now believe the chances of a recession hitting the US economy are rising due to the upcoming impact of tariffs, declining consumer sentiment, and spending cuts by the new administration.

Jeffrey Gundlach, the founder and CEO of investment firm DoubleLine Capital, recently talked to CNBC about the rising probability of recession and the impact of government spending cuts initiated by the Department of Government Efficiency, or DOGE.

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Recession Probability ‘Higher Than 50%'

"I think the cutting will weaken economic growth which may lead to a counter-response. It’s one of the problems when you get yourself in one of these vicious circles that we’ve got ourselves in," he said. "But I do think the chance of recession is higher than most people believe. I actually think it’s higher than 50%, coming in the next few quarters."

Grundlach said the spending cuts implemented by DOGE and the government's efforts to solve the budget deficit problem could result in slower economic growth and will "knock out a lot out of GDP."

DOGE was established by Trump in January to maximize government efficiency.

Asked about his exact recession estimate, Gundlach said it's between 50% to 60%. 

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Government Needs to Do More for a ‘True Detox'

Gundlach believes a decline in government spending will weigh on economic growth. He called it "bizarre" to believe that the government can fix the problem of budget deficit while increasing economic growth. However, the analyst said the spending decreases by the Trump administration are "nothing" and the economy needs "a lot more" than that.

“It's kind of disheartening that cutting 100 lousy billion dollars out of the potentially out of the government budget is being met with hysteria as if that’s even a drop in the bucket. I mean it’s nothing so we need to cut a lot more than that if we’re going to get to a true detox," he said. 

Last month, Treasury Secretary Scott Bessent told CNBC that the budget cuts were a "detox" and said that the economy became "addicted" to government spending.

Grundlach does not see a rally in the Treasury bond market because of what he called a "Pavlovian response" already experienced amid recession risks. 

"We had the 10-year down to 3.60% and we’re we’re we’re now we’re back up about four and a quarter and I’m not sure we’re going to go below four again in spite of the fact the economy may weaken,” he said. 

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‘Wishful Thinking' To Expect 2% Inflation

Gundlach also expects inflation to tick higher because of the impact of the tariffs. He has a "hard time" seeing inflation getting back to the Federal Reserve's 2% target amid GDP growth concerns.

"We’re getting closer to recession and we’re they just upgraded the inflation forecast although just for this year I do think it’s kind of wishful thinking to think that somehow magically it’s going to go back down to 2% in 2027," he said. 

Last month, Goldman Sachs cut its US GDP growth forecast to 1.5% from 2% for 2025.

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