DoubleLine CEO Jeffrey Gundlach: Powell is right to say that inflation has declined a lot

Reaction to the Fed Decision

The speaker discusses their reaction to the Federal Reserve's decision and how it aligns with market expectations.

Noncommittal Decision

• The speaker believes that the Fed's decision was very noncommittal, which is consistent with market expectations.

• Steve Liesman's background tone was hawkish, but he was right to say that inflation has come down a lot and won't come down as quickly anymore.

Interest Rates and Bank Failures

• The low inflation print will likely be around 4% for CPI this year, implying that the Fed will keep rates around their current level unless something goes wrong with the economy.

• Rising interest rates are not something people are used to, and if they stay up for a prolonged period of time, it could have different ramifications than bank failures.

• People are pulling money out because there is no reason to keep it in when higher interest rates can be obtained elsewhere.

Recessionary Odds

• Quantitative tightening, credit contraction, and other factors have led the speaker to be relatively neutral or somewhat optimistic about the economy. However, recessionary odds are pretty high right now.

• The bond market says there won't be any more rate hikes and that cuts are almost assuredly coming by the end of next year.

• The speaker thinks markets for risk assets are too complacent given higher rates and credit contraction. They believe we'll see higher default rates and lower quality income securities as we move into next year.

Last Flight to Quality Rally?

• There is concern about whether this might be the last flight to quality rally that creates profits for treasury bonds.

• The speaker is worried about the state of the situation in the United States, where we're not in a recession yet, but there's a 7% definite chance of one happening.

Fed Decision

• The speaker thinks today was on the margin a mistake, but they believe the market was completely prepared for this exact press conference.