The US economy is in for some turbulent times as rising inflation, a growing deficit and increased interest rates bite, bond star manager Jeffrey Gundlach has warned.
Speaking at the Charles Schwab Impact conference in San Diego, Gundlach gave a gloomy outlook for the US economy, predicting that inflation could hit 3% in the next six months and that the US deficit would increase whoever wins the race to the White House.
Gundlach, who is chief executive of DoubleLine Capital and manager of the firm’s $61.8 billion Total Return Bond fund, told the event: ‘We’re in the eye of a hurricane for the next three to four years. Come 2018, 2019 and 2020, look out.’
He added that the deficit could hit $1.5 trillion in 2017 due to the cost of social security, Obamacare, Medicaid and possible infrastructure projects.
On the US election, Gundlach has previously said Trump would win, and appeared to stand by this prediction despite recent poll results which make Hillary Clinton the firm favorite.
However, he said Trump, like Clinton, would spend more and further increase the deficit.
‘Trump would—and will when he wins—ramp up the deficit,’ he said.
He backed treasury inflation-protected securities (Tips) as a good investment given the macro economic outlook.
This was a reversal of his view in 2014 when said ‘Tips are for losers’.
He told the conference: ‘I like Tips. Tips are for winners.’