Billionaire Investor Jeffrey Gundlach Predicts Recession, Advises Cash Over Stocks

Billionaire investor Jeffrey Gundlach recently warned investors about the growing risks in the stock market, suggesting that a downturn in the economy was unavoidable. Amid the high-flying levels of market euphoria, he sees a recession not just as a possibility but as something that's inevitable.

Cautious Outlook on Market Exuberance

Speaking with Fox Business Network, Gundlach shared his concerns regarding the heated valuations and the optimism prevailing in the market. With a cautious eye, he remarked that holding cash might be more prudent, particularly with the intention of capitalizing on post-recession opportunities.

"I'm suspicious of the valuations, I'm suspicious of the exuberance in the market, so I want to have cash at this point which I might want to deploy in the aftermath of the recession that is going to come," Gundlach explained.

Soaring Stock Values Raise Concerns

Known as the 'Bond King', Gundlach expressed reservations about the S&P 500 index's remarkable growth—a 24% increase last year and an additional 3% climb this year, achieving new record highs. He highlighted the substantial rises in tech stocks such as Nvidia Corp. (NVDA), which reached a market value of $1.5 trillion.

He advised, "We're in a valuation spot in the equity market where I think you have to start looking long term and kind of skip this last phase of the exuberance game because I think the values are very, very high."

Indicators Pointing Towards Recession

He considered the inversion of the yield curve and its following flattening as one of the reliable signs signaling an upcoming recession. He pointed out that the 10-year Treasury yields fell below those of 2-year yields more than 18 months ago, with the gap having closed considerably since then.

Moreover, Gundlach mentioned the Leading Economic Index, which has been pointing downwards for 21 consecutive months—a signal that signals potential economic challenges ahead. In light of these indicators, he has called for the Federal Reserve to reduce interest rates this year after a period of hikes from near zero to over 5%.

The Recurring Recession Concerns

It's not the first time Gundlach has voiced his worry about a recession. Earlier in the month, he forecasted a decline in the S&P 500 and maintained a bearish stance on the market. He also anticipated that the top-performing 'Magnificent Seven' stocks would potentially fare worse than the broader market in the future.

recession, stocks, investment