Jeffrey Gundlach delivered a speech at the 24th Annual Sohn Investment Conference in New York on May 6, 2019.
Adam Jeffery | CNBC
CEO of Double Line Capital Jeffrey Gundlach Interest rates could soar if Republicans ultimately take control of the House of Representatives and secure a third consecutive victory in office, giving President-elect Trump free reign to spend, he said on Thursday.
Gundlach is a well-known fixed income investor whose firm manages more than $96 billion.
Gundlach said on CNBC: “If the House is controlled by Republicans, there will be a lot of debt, interest rates will be higher in the long term, and it will be interesting to see how the Fed responds to that.”end bell”.
Battle for House control undecided As of Thursday, Republicans won a new Senate majority. The Federal Reserve cut interest rates on Thursday, and traders expect the central bank to cut rates again in December and multiple times in 2025.
Prominent investors such as Gundlach have been expressing concerns about the challenging financial situation. Fiscal year 2024 has just ended and the government is operating Budget deficit exceeds $1.8 trillionincluding more than $1.1 trillion earmarked for financing costs of $36 trillion in U.S. debt.
“Trump said he’s going to cut taxes… He’s very supportive of cyclical stimulus,” Gundlach said. “So, in my view, there’s going to be some pressure on interest rates, especially over the longer term. I think the outcome of this election is very, very important.”
If the Trump administration extends the 2017 tax cuts or introduces new tax cuts, it could significantly increase the national debt in the coming years and further worsen an already difficult fiscal situation.
Still, Gundlach, who has predicted a recession for the U.S. economy, said Trump’s presidency makes such a recession less likely.
“I do think, and rightly so, that a Trump victory would significantly reduce the likelihood of a near-term recession,” Gundlach said. “Certainly, when Mr. Trump has used plain English over the past three months to promote this kind of agenda “The probability of a recession will decrease.”
