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DoubleLine's Gundlach: High-yield market flashing 'yellow' on recession

Jeffrey Gundlach, Wall Street's bond king and Founder and Chief Executive Officer of DoubleLine, which manages $120 billion, said late-Tuesday, the high-yield “junk” bond market, which has been a leading indicator of recessions, is flashing “yellow now”.

Key Quotes (Source: Reuters):

The signal “may be ... a false positive,” but “this is something we’re going to have to watch very, very carefully.”

The current buy-the-dip mentality reminds him of the complacency that took place in the 2007-2008 credit market right before the great financial crisis.

“There’s potential for that here. Because the panic in December was a buying panic - not a selling panic - you never saw the VIX truly spike the way you want for a panic. You want to see that thing over 40. It never made it to 40.”

Federal Reserve Chairman Jerome Powell on Friday pivoted from pragmatism to a “Powell Put” - that the Fed under his leadership will act like an options contract to prevent stocks from falling too much.

The ballooning U.S. federal government debt is “a completely horrific situation” and that the United States could be at a “tipping point” in a “debt-compounding cycle.”

“Are we growing at all or is it all just the increase in debt?” 

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