Recession is coming — and a raft of companies will fail, warns elite investor Jeffrey Gundlach

The DoubleLine Capital founder and CEO also underlined the pain caused by inflation — which soared to over 9% in 2022 and remains well above the Fed’s 2% target — and interest rates, which have surged from virtually zero to over 5%.

Consumers have faced a double whammy of higher prices for basics such as food, gas, and housing, while also owing more interest each month on their car loans, credit cards, mortgages, and other debts.

“All of these things are up tremendously, the things you have to buy,” Gundlach said, citing car insurance and homeowners’ insurance as examples. “Those credit card bills are really starting to add up.”

Persistently higher rates will drive some companies to ruin and tank the wider economy, he predicted.

“I think that higher for longer is going to lead to a recession,” Gundlach said. “You’re not going to take out Tesla necessarily — they might have other problems, but it’s not going to be because of interest rates.

“What you take out is the people, small businesses, medium businesses,” as they’ll run out of cash borrowing at 10% instead of 4%, he said.

Gundlach did note that softening economic data has raised the probability of two Fed rate cuts this year, but he doesn’t expect that to stave off disaster.

It’s worth emphasizing that the veteran fund manager has been ringing the recession alarm for more than two years.

He predicted last fall that a downturn would occur in the first half of this year, which seems unlikely at this point. Yet Gundlach is one of several experts who see cracks forming in the economy.