‘Bond King’ Jeffrey Gundlach Names One Catalyst That Could Trigger a Fed Interest Rate Cut This Year

Billionaire Jeffrey Gundlach Predicts Fed Rate Cuts Due to Looming Crisis

Renowned billionaire investor Jeffrey Gundlach, also known as the “Bond King,” has made a bold prediction that the United States will face a crisis this year that will compel the Federal Reserve to initiate a new round of rate cuts.

Speaking in a recent CNBC interview, Gundlach, the CEO of DoubleLine Capital, foresees a scenario where the Fed will lower interest rates in response to liquidity issues rather than traditional economic factors like employment and inflation.

“I do think they’ll cut rates, but I don’t think it’s going to be because of much better inflation data because I don’t think it’s going to get much better. I doubt the unemployment rate is going to be a shocker in the near term, like in the next few months.

But I do think they’ll cut rates because some liquidity problems may come up. So I do think they’ll probably cut rates by year end, and I still think it’s probably less than the market thinks, but I’m closer to the market now because I’ve stayed at two and the market has gone from five or six down to two and a half [cuts].”

Gundlach points to recent examples like Harvard’s bond sale as evidence of liquidity issues creeping into the financial system. He suggests that institutions, including prestigious universities, are facing cash shortages despite having substantial assets.

“The thing that I feel is starting to get talked about, and I think might be significant in the next market problem is this illiquidity issue that [has] developed and it’s getting some play on the newswires with Harvard and some elite universities where they don’t have any money.

They’re asset-rich but they’re cash-poor. Harvard has a $53 billion endowment, and they’ve tapped the bond market now twice for basically operating cash. And the reason is – and I’m just using Harvard as a placeholder because this has been in the news and reported with statistics – they report 40% of their endowment in private equity.

I suspect that another big slug is in private credit, which has been a booming asset class. We’re starting to see stories of some of the faster-moving university endowments saying, ‘We might want to exit some of our commitments…’

I think this is going to be an issue.”

As Gundlach raises concerns about liquidity problems potentially triggering a crisis, his insights offer a unique perspective on the state of the financial markets and the challenges that lie ahead.

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