DoubleLine Capital's Gundlach says current debt expansion amid rising interest rates 'unprecedented'

Tax cuts and increased federal spending now could raise U.S. deficit to 125% of GDP by 2030.
JUN 13, 2018
By  Bloomberg

The soaring U.S. budget deficit at a time interest rates are rising may be setting the stage for fiscal trouble, according to Jeffrey Gundlach, chief investment officer of DoubleLine Capital. "Here we are doing something that almost seems like a suicide mission," Mr. Gundlach said Tuesday in a webcast discussing his DoubleLine Total Return Bond Fund. "We are increasing the size of the deficit while we're raising interest rates." The Federal Reserve is expected to raise its benchmark rate for the second time this year and to signal plans for future hikes when it meets Wednesday. Meanwhile, the recent tax cuts and increased federal spending are setting up the U.S. deficit to balloon toward 125% of gross domestic product after 2030, according to DoubleLine slides citing Congressional Budget Office projections. "It's pretty much unprecedented that we're seeing this level debt expansion so late in an economic cycle," Mr. Gundlach said. Mr. Gundlach is also chief executive officer of Los Angeles-based DoubleLine Capital, which oversaw assets of about $119 billion as of March 31. Among his other observations: The 10-year Treasury yield is still on track to climb to 6% by 2020 or 2021. For now, the lower rate on German 10-year debt is limiting increases in U.S. rates. Oil is likely to climb to as high as $90 a barrel. There's no recession likely in the next six to 12 months, but one is possible by 2020, which could make the next presidential election "a wild ride."

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.