(The Oregonian) DoubleLine Capital founder Jeffrey Gundlach, once dubbed “The King of Bonds,” predicted Donald Trump’s 2016 election victory almost a year before it happened.
“Trump at that point was like 500-to-1 or something in the betting odds,” Gundlach told New York magazine last week. “But I was absolutely sure he was going to win. ... People wanted the dishes to get broken, you know?”
Four years later, do people still want Washington, D.C.’s dishes to get broken? Hard to say, though most Americans probably would like to keep the economy’s crockery intact.
But Gundlach sees economic trouble on the horizon -- thanks to the man in the Oval Office. Looking at Trump’s recent comments about the Federal Reserve’s actions and U.S. tariffs on Chinese goods, the 59-year-old investor worries the president is trying to engineer a mini-downturn in hopes the economy will come back around in time for 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 said in the wide-ranging interview. “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.”
President Trump last week called China’s president, Xi Jinping, an “enemy.” He tweeted that “American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” The president of the United States does not have the authority to force American companies to do this, but the increasingly belligerent trade rhetoric sent the stock market sharply downward.
The president also has been using Twitter to hector Federal Reserve chairman Jerome Powell to continue rate cuts.
Monday morning, Trump announced the U.S. and China would restart trade talks, saying: “We’ll see what happens, but I think we’re going to make a deal.”
The hyper-confident Gundlach, a former Yale University mathematics doctoral student who claims he can complete the New York Times’ Sunday crossword puzzle in half an hour, says nobody, no matter how much power he or she wields, can expect to successfully manipulate the economy with precision.
“It’s hard to time the economy by, you know, blunt instruments,” he said.
Gundlach added that he sees “a 75-percent chance of recession prior to the [2020] 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.”
We’re now 14 months from the next presidential election. Is The King of Bonds ready to make another bold election prediction? He is, sort of.
“I can’t even imagine Trump running for reelection if there’s a recession in the summer of next year,” Gundlach said. “I don’t understand what he could run on.”
