- The US economy is lurching toward a recession, according to Jeff Gundlach.
- The DoubleLine Capital chief pointed to a "de-inverted" bond-yield curve and the rising unemployment rate as signs of a looming slump.
The US economy is clearly headed toward a recession, veteran bond investor Jeff Gundlach has warned.
The DoubleLine Capital CEO said Wednesday that the yield curve – a bond-market gauge that measures the gap between 2-year and 10-year Treasury yields – is signaling that a downturn is coming.
"The shape of the yield curve is extremely unstable at this time," Gundlach told CNBC's "Closing Bell".
"This is the classic action that one gets prior to recessions," he added. "You get a yield curve that inverts, people talk about that it's very inverted, but it hangs out there for a long time."
Recessions typically happen when the yield curve de-inverts after being inverted for around a year, Gundlach noted. Inversion of the curve means short-dated yields rising above long-maturity ones, which is against what's considered normal in the bond market.
The US Treasury bond curve inverted back in mid-2022, but has pared much of that move since the middle of this year. The yield premium on 2-year bonds over 10-year ones has now narrowed to just 24 basis points after October's bond-market meltdown from as much as 109 basis points at the start of July.
Gundlach also flagged the US unemployment rate, which is still hovering below 4% but recently moved clear of its 12-month moving average, as an economic indicator that's starting to look "very recessionary".
The next signal a downturn is coming could be Americans losing their jobs, he added. Several Big Tech companies and top investment banks have slashed their headcounts over the past two years, but most other industries have so far steered clear of cutting staff.
"I really believe that layoffs are coming," Gundlach told CNBC. "We've seen hiring freezes, and now we're starting to see layoff announcements – not en masse, but they're out there for financial firms and technology firms, and I believe that's going to spread."