DoubleLine: Recession Odds Are Down To 40%

(Reuters) DoubleLine Capital, the investment manager headed by Jeffrey Gundlach, has lowered its view on the chances of a U.S. recession in the next year to 40% from 75% a few months ago, said Andrew Hsu, co-portfolio manager of the DoubleLine Total Return Bond Fund.

"It has changed in the past several months," Hsu said at the Reuters Global Investment Outlook 2020 Summit in New York. "The base case right now is that we estimate over the next 12 months a 40% chance of recession, and that's down from 75% that we stated several months ago."

Hsu cited "some improvement in economic fundamentals" and the potential resolution of the U.S.-China trade dispute.

"Although I don't think the trade dispute will be resolved anytime soon, there have been some positive steps in the process," he said.

U.S. economic growth slowed to 1.9% in the third quarter as business investment fell on trade war concerns. Nevertheless, weaker growth and a slowdown in the manufacturing sector has not yet spilled over in consumer spending or employment.

Gundlach said back in June that the odds of a recession in the next six months were 40-45% then, which means that scenario would have played out by now. He's effectively kicked the can down the road.


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