Investment guru Jeffrey Gundlach warns that he thinks U.S. stocks will get crushed in the next recession and will struggle for a long time to recover.
“The pattern of the United States outperforming the rest the world has already come to an end,” the CEO of $150 billion DoubleLine Capital recently told Yahoo Finance.
This year has been one of the "easiest" ever for investors in "just about anything...Just throw a dart, and you're up 15-20%, not just the United States, but global stocks as well," Gundlach said.
“When the next recession comes, the United States will get crushed, and it will not make it back to the highs that we've seen, that we're floating around right now, probably for the rest of my career, is what I think is going to happen,” he said.
"I think in the next recession the dollar will fall because of the deficit problem United States, and that investors will be better served to own foreign stock markets instead of the U.S. stock market in dealing with the next recession,” Gundlach said.
Gundlach isn't the only respected economic voice to warn of recession.
Former Federal Reserve Chair Janet Yellen warned that increasing economic risks threaten to eventually push the U.S. into another recession.
She said while the U.S. economy is in “excellent” shape one of the most prominent risks is wealth disparities, which she said are “extremely disruptive.” In a downturn, the Fed would have little room to move, due to low rates, she added.
Yellen also said tariffs the U.S. has leveled on Chinese imports aren’t doing any good.
“I would bet that there would not be a recession in the coming year. But I would have to say that the odds of a recession are higher than normal and at a level that frankly I am not comfortable with,” Yellen said at the World Business Forum.
With three rate cuts this year, there remains “not as much scope as I would like to see for the Fed to be able to respond to that. So there is good reason to worry,” Yellen said, CNBC reported.
The U.S. economy has slowed but remains relatively solid. Uncertainty over the country’s trade policy has dented business investment and chilled global growth. But consumers are still spending, helped by a tight labor market where the lowest unemployment level in nearly 50 years is gradually lifting wages.
Despite the central bank’s efforts to guide the economy, Yellen cited “a very worrisome long-term [trend] in which you have a very substantial share of the U.S. workforce feeling like they’re not getting ahead. It’s true, they’re not getting ahead.
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