Jeffrey Gundlach, CEO of DoubleLine Capital, known as the “new bond king,” recently issued a warning during an interview with FOX Business News. He predicted that the continuous increase in U.S. household debt and the slowdown in corporate growth will eventually lead to an economic recession.
Speaking about the U.S. economy, Gundlach pointed out that the recent data released in the past week is quite concerning. He explained that the Leading Economic Index for April, announced by the U.S. Conference Board last Friday, has declined for two consecutive months. At the same time, the New York State Manufacturing Index for May, released last Wednesday, dropped to -15.6, marking the sixth consecutive month of negative growth. These data reflect the ongoing deterioration of the U.S. economy.
Although the inflation data for April in the U.S. did not show acceleration, Gundlach pointed out that high prices still put pressure on American consumers, and many people are using credit cards to alleviate this burden. He emphasized that credit card bills are gradually accumulating and becoming a major burden for people.
According to a report released by the Federal Reserve Bank of New York on the 14th, the total amount of U.S. household debt surged to $17.69 trillion in the first quarter of 2024, reaching a historical high and increasing by $184 billion, or 1.1%, compared to the previous quarter. This growth was mainly driven by a surge in mortgage loan balances, which increased by $190 billion to reach $12.44 trillion as of the end of March. Auto loan balances increased slightly by $9 billion, continuing the upward trend since 2020, and currently reaching $1.62 trillion. Although credit card loan balances decreased by $14 billion to $1.12 trillion, it is still close to a historical high. (The decrease is due to U.S. consumers making efforts to repay debt after the end of the holiday shopping season last year.)
Gundlach further stated that this reflects how people adjust their consumption behavior under the unlimited borrowing policy in the U.S., even if it means increasing personal debt and potentially making their financial situation more fragile.
With the continuous increase in U.S. household debt, Gundlach warned that an overall economic recession is inevitable. However, he admitted that it is difficult to determine when exactly this situation will impact the U.S. economy.
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