Jeff Gundlach Gives A Warning For The 2020’s

Last week, DoubleLine CEO Jeff Gundlach sat down with Yahoo Finance to discuss how US stocks would get absolutely crushed in the next recession. In a continuation piece via Yahoo, Gundlach suggested that trouble is brewing in debt markets as interest rates hover around zero. Gundlach said the 2020s could exhibit socio-economic chaos as the debt bomb the US is sitting on ignites into the next recession.

"It's pretty interesting because the 20s in the 20th century, the 20s were super boom times. And weirdly, I think the 20s this time will be very much different than that, with real turmoil."

Gundlach said the decades of can-kicking would finally stop in the 2020s, and the US will have to face realities relating to its debt situation. 

"[We're] going to have to face Social Security, health care, all of these things, deficit-based spending — all of that is going to have to be resolved during the 2020s because the compounding curve is just so bad," he said.

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The billionaire investor said interest costs on the debt would soar from 1.25% to at least 3% by 2027. "That's a big, big increase. And that's coming," he warned.

"And when you do that, it kind of says, 'Hey, GDP is going to be knocked by 2%-2.5% because we have to pay interest,'" he added, which suggests that the 2020s could be a lost era situated in a low growth period with social-economic instabilities. 

He said the Federal Reserve understands what's coming down the pipe, and it's why everyone is starting to talk about MMT - as it could be the policy prescription pitched by lawmakers and the Fed to lift the US out of the next financial downturn. 

Gundlach said, "they [Fed] knows that this problem is going to really hit the headlines when the next economic downturn comes, and I think it's foolish to believe that there will be no economic downturn for the next ten years considering where we are right now."