Gundlach: There Will be a Recession in the First Half of 2024

On September 17, 2023, this article was corrected to show that the song, Peace, Love & Understanding, was written in 1974, not 2012 as originally stated.

The consensus is wrong, and the Fed has not engineered a “soft landing.” A recession is all but certain in the first half of next year, according to Jeffrey Gundlach.

Gundlach spoke to investors via a webcast, which he titled “Peace, Love & Understanding,” and the focus was on his flagship total-return fund (DBLTX). Slides from that webcast are available here. Gundlach is the founder and chairman of Los Angeles-based DoubleLine Capital.

The title is from a 1974 song written by Nick Lowe and made famous by Elvis Costello. The lyrics are about a depressing situation, and where one can look for understanding. Gundlach’s gloomy outlook was centered on his recessionary outlook, and his response was to allocate to bonds.

The yield curve has been inverted for more than a year. When it de-inverts, he said, it is a reliable recessionary signal. That hasn’t happened. But if the economy weakens – if Fed tightening has more of an effect – there will be a recession.

“I expect a recession in the first half of 2024,” he said, “but not in 2023.”

The leading economic indicators (LEIs) have been recessionary for a year and are still recessionary, Gundlach said.