“I think we’re starting to see real reasons to believe maybe not here in 2022, but in 2023 we might see a real recession,” Gundlach told the host. Charles Payne.
He referred to housing prices, noting that “affordability has declined very significantly in the past two years.”
“Home prices have risen 30% broadly in the US in the past two years, and mortgage rates on a 30-year fixed-rate mortgage have doubled,” Gundlash continued. “What that means is that the monthly payment for the same house two years ago is now doubled.”
The median sale price of existing homes rose to $375,300 in March, up 15% from the same period last year, according to information provided by National Association of Realtors (NAR) Late last month.
“Things looked very good in the wake of the money sprinkling in response to the pandemic, but a lot of that was upfront consumption,” Gundlach continued, pointing to the PCE trend of durable goods, nondurable goods and services.
Durables are long-lasting goods that you don’t need to buy often, including cars, appliances, and furniture.
“For five or four years as we entered the lockdown before the pandemic, all three of these chains have been increasing very gradually, consistently and at the same pace,” Gundlach said.
“And then, when all the money sprinkling happened, we saw this explosion in durable goods where they beat the trend by 30%, and we saw an explosion in non-permanent consumer spending, now 20% above the trend in the four-year period of stabilization and gradual price increase or rather an increase consumer spending.
“What this means is that we have to get back on trend: when you buy durables, when you buy a used car; when you buy an appliance or a refrigerator, it is durable and that means you buy it infrequently,” he explained, emphasizing that “we have to pay” those Accelerated sales.
“So when you combine the draw that we’re going to get from this spending being given, we’re now paying for it, because home affordability has been so bad and sentiment collapsed in the University of Michigan survey, there’s good reason to believe we have a payoff coming to fill the hole again. In 2020 and 2021.”
In March, the University of Michigan Consumer Sentiment Index (MCSI), a monthly survey of how consumers feel about the economy, personal finance, business and purchasing conditions, found that Consumer confidence It fell to a new low in a decade due to concerns economic inflation It grew amid the continuous Russian invasion of Ukraine.
However, the latest available data revealed that in April, University of Michigan US consumer confidence unexpectedly jumped to 65.2 from an 11-year low of 59.4 in March.
Gundlach provided insight a day after revealing that Consumer Price Index for the month of April It remained near a 40-year high, which raised concerns about a looming recession.
Wednesday’s report from the US Department of Labor showed that Inflation slowed slightly in April, It fell to 8.3% from 8.5% in March. Investors also found some half-full signs in the data that the Consumer Price Index, or CPI, may be at its peak and set to decline further, but the numbers are still higher than economists had expected.
On Thursday, it was revealed Wholesale prices accelerate more than expected in April With inflation continuing to rise as a result of strong consumer demand, the supply chain linked to the pandemic, and the Russian war in Ukraine.
The Department of Labor said, on Thursday, that the Producer Price Index, which measures inflation at the wholesale level before it reaches consumers, rose 11% in April from the previous year. On a monthly basis, prices are up 0.5%. Although this is a slight moderation from March’s reading of 11.2%, the measure is still above Refinitiv economists’ expectations of 10.7%, indicating that inflationary pressures remain strong.
“No one expected that we would get an 8.5 year-over-year CPI so quickly and now it’s running at 11% on the PPI today,” Gundlach said, also referring to higher export and import prices.
“Price will come down, but the models show we will be lucky if we close 2022 at around 6% CPI, which is three times Federal Reserve Look for the Treasury rate and top it up,” referring to the central bank’s 2% inflation target.
“Since the Fed held that press conference six business days ago, we’ve seen just about everything go downhill,” he continued.
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The Federal Reserve It announced it raised the benchmark interest rate by half a point for the first time in two decades during last week’s press conference, in a move that threatens to slow US economic growth and exacerbate financial pressure on Americans.
A 50 basis point hike – a widely expected move – puts the key federal funds rate in a range of 0.75% to 1.0%, the highest level since the pandemic began two years ago.
Gundlach noted that “the patterns of risky assets in the bond market are already starting to change” and “are becoming more and more cautionary.”
He cautioned that “the turbulent trading that marks the bottom” has yet to be tried and said we are waiting for that to happen.
Megan Heaney of FOX Business contributed to this report.