New Bond King Gundlach: inverted yield curve + continued inflation, no possibility of interest rate cut in next Fed meeting

DoubleLine Capital LP CEO Jeffrey Gundlach said that investors will not see a rate cut at the next Federal Reserve policy meeting. "People were expecting two rate cuts this year, but the inflation market did not cooperate at all," Gundlach said. "In my view, a rate cut is not possible when the two-year Treasury yield is nearly 50 basis points higher than the federal funds rate." Gundlach said that with Kevin Warsh recently confirmed as the new Fed Chair, it is a "difficult time." With the Iran war driving oil prices higher and seeping into U.S. inflation reports, he predicted that after a 3.8% surge in consumer price index in April (the fastest pace since May 2023), this upward trend will continue. Gundlach said that DoubleLine's model indicates that "the first digit of the next overall CPI reading will start with a 4." The stock market is performing "exceptionally strong" in this turmoil. "When the Fed does nothing about inflation, the stock market will continue to soar," he said. While Gundlach has been "very bullish on commodities" for about the past three years, with bond yields negative and the prediction that some interest from the speculative market is flowing out of bitcoin and other speculative assets, investors have almost no choice but stocks. However, he said that there are inherent risks in the stock market itself. "The market valuation is very high, speculation is strong, but earnings continue to significantly exceed expectations," Gundlach said. "I think this is fueling the speculative frenzy." Gundlach once again issued a warning about private credit, and when asked if he was concerned about the industry, he said, "Of course, I am concerned." He said, "The private credit market always seems to have a trait of constantly needing new investors. Perhaps this is just the greed of the sponsors, they always want more assets under management."