Jeffrey Gundlach, chief executive of DoubleLine Capital, says he thinks President Donald Trump is playing a very dangerous game by intentionally forcing an economic downturn in order to save the day just ahead of the 2020 election.
“I think maybe he’s playing a dangerous game of intentionally weakening the economy so the Fed cuts rates and monetary easings work with a lag,” Gundlach told New York Magazine.
“Cutting rates now would probably be beneficial in the summer of next year, ahead of the election. Also if you put on tariffs, or scare consumers, then maybe you can take the tariffs off and you’re moving consumption from today until 2020. That’s potentially a strategy. As I say, it’s pretty dangerous. It’s hard to time the economy by, you know, blunt instruments. I don’t know, it seems like he’s working really hard to get the Fed to cut rates — and the bond market is certainly helping. You know the bond market is telling the Fed they’re completely on a different planet,” Gundlach said.
Gundlach puts his odds of a downturn in the next year or so at 75%.
“I give a 75% chance of recession prior to the election and have for months. I know that the markets and the rhetoric has come around to something close to that — but when I first said it, people thought I was crazy,” he said. “But now CEO surveys are getting a little bit shaky. CEO confidence is declining pretty sharply. It’s not at a recessionary scare level quite yet, but two thirds of CEOs surveyed expect a recession before the end of 2020 so that’s pretty close. I use the election as the end date but it’s about the same thing. The Fed model also shows pretty high probability now of a recession if you put it in the context of data since 1985.”
Gundlach reiterated a pretty shocking prediction he’s made before: If a recession hits and it gets bad, Trump won’t seek re-election.
“But I can’t even imagine Trump running for re-election if there’s a recession in the summer of next year. I don’t understand what he could run on,” he said.
“Trump could pull a Lyndon Johnson and just say, I’m not running. Because he’d probably know he was going to lose. And you know, Trump doesn’t want to lose. That’s his reason for not running, he could do the most ridiculous thing ever. He could actually say in the midst of a recession, ‘I’ve completed my mission of making America great again, there’s no work left to do, so there’s no point in me running,'” he said.
“I have the suspicion that we’ll see somebody new in this race,“ said Gundlach, who oversees more than $130 billion in assets under management.
“Also, I think Hillary … she could show up. She really could.”
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