Gundlach’s warns of recession – Markets shrug: Two rate cuts walk into a trade war

• Stock rally – yeah – not so much.

• Gundlach continues to call for a recession – 9 yrs now!

• Oil up on Iran Sanctions and OPEC+ cuts?

• Bonds flat, Gold churns.

• Try the Caramelized Red Onions & Sun-Dried Tomato Cream Pasta.

I guess investors were not that ‘wowed’ with JJ’s commentary. Stocks struggled all day ending ‘slightly’ lower as the excitement seen on Wednesday appeared to wane……the reality of those ‘two’ rate cuts fading after investors dissected and digested the ‘data’…..and focused on the ongoing uncertainties around the potential impact of this trade war, a weakening economy and higher future inflation.

Now, stocks did get a mid-morning boost – after the Existing Home Sales surged…. rising 4.2% vs. the estimate of -3.2% and Initial Jobless Claims did NOT rise - but that ‘excitement’ was short-lived – again suggesting ongoing investor concerns amplified by policy uncertainty and ongoing volatility.

Now, Famed investor Jeffrey Gundlach (DoubleLine Capital) telling us that ‘HE’ thinks the chances of a recession (and tougher times ahead) are better than 50%. And I emphasize that it is only his opinion – and his opinion has a ‘mixed’ record at best.

While he has built a reputation as a prominent voice in economic and market forecasting, assessing his accuracy involves looking at his track record over the years, which shows a mix of prescient calls, near misses, and some forecasts that didn’t pan out as expected. In the end – Remember that economic forecasting is inherently uncertain—subject to unforeseen events, policy shifts, and complex variables—so no one, including Gundlach, is immune to missteps.

He’s been vocal about an impending U.S. recession for 9 years (2016) —often citing indicators like the yield curve, rising debt, or weakening demand that never happened. His 2023 forecast of a recession by mid-2024, based on “full-on recessionary signals” like a softening labor market and manufacturing weakness, also NEVER materialized and still hasn’t materialized as of today. U.S. GDP grew 2.8% in Q4 2024, and unemployment, though ticking up to 4.1% remains low by historical standards. I guess his latest prognostication is based on the Atlanta GDP Now forecast that suggests 1st Qtr. 2025 will be negative…..(-2.1%).

Let’s be clear - Jeffrey himself noted in late 2024 that some traditional recession indicators “don’t work” anymore due to shifting market dynamics, suggesting he’s aware of the limits of his models. This adaptability is a strength, but it also highlights how his forecasts can miss the timing or severity of events. Recall that when the yield curve inverted in 2022 – Experts told us that it was just a matter of 16 – 18 months before we went into a recession – That NEVER happened.

Now to be sure – we WILL get a recession at some point, the depth or severity of it is unpredictable – at some point Jeffrey will be correct – but just not yet……. it’s just part of the cycle…here are some street odds that we will get ‘a recession’ sometime in the next 12 months…. - JPM raised the odds to 40%, GS is at 25%, Mohammed El-Erian is at 30%, Bankrate is calling it 26%, while Polymarket traders are betting on a 39% chance. The NY FED probability model – based on the 10 yr/3-month treasury spread is now showing a 23% chance by January 2026. If we average all of this – we are somewhere in the 20-30% range… In the end – it is what it is……which again speaks to a well-defined, well-balanced portfolio.

At the end of the day – the Dow lost 11 pts, the S&P lost 12 pts, the Nasdaq gave up 59 pts, the Russell down 13 pts, the Transports down 55 pts, the Equal Weight S&P down 25 pts, while the Mag 7 lost 22 pts.

Bonds moved a bit higher on the news – the TLT + 0.1%, the TLH + 0.15% while the AGG added less than 0.1% leaving yields essentially unchanged…. The 2-yr yield is now 3.94%, while the 10 yr is at 4.22%.

Oil continues to trade in the tight range…..($66/$68) – although yesterday it did trade up 2.2% to $68.37 before ending the day at $68.10 – this morning it is down 12 cts at $67.985. News that Trump is vowing to put ‘maximum pressure’ on Iran hoping to drive their exports to near zero as well as a new OPEC+ plan to have 7 of their members CUT production being cited as the reasons for yesterday’s surge.

Now think about this – the Saudi’s pledged to raise production in April and now they are forcing other members to cut – talk about chaos! In any event – oil remains in that tight range for now. Trendline resistance though is $69.60.

Gold continues to feel a bit ‘toppy’ and while I continue to think it moves higher, I would not be surprised to see some digestion…..It too is in a tight range – $3,000/$3,060. Yesterday it rose $11 and this morning it is down $6 at $3,038 – Trendline support is all the way down at $2,885, yet should we back off – the chart says that there should be plenty of interest at the $2,995 level. And while all of that is a possibility – my gut says that we churn a bit and the continue to push up. Why? Because of the continued discussion about the uncertainty surrounding tariffs, the (engineered) economic slowdown, the ongoing geo-political uncertainty AND that ‘coming’ recession.

US futures are DOWN this morning – Dow futures -105 pts, the S&P’s down 15 pts, the Nasdaq down 55 pts while the Russell is down 9 pts as the churn and thrashing around continues.

There is NO eco data today but next week is a BIG week…..we will get New Home Sales – expected to be up 3.5%, Conference Board Consumer Confidence reading at 94 – down from 98.3, Building Permits, Durable Goods expected to be -0.7% down from +3.2%, Final read on 4th Qtr. GDP at +2.4%, Pending Home Sales, Retail Inventories, Personal Income and Spending along with the FED’s favored inflation gauge – the PCE – which is expected to hold steady.

In addition – expect to start hearing more about (pre) earnings guidance – think guidance CUTS…and it started with NKE this morning…..pointing to ‘tougher times ahead’ clouded by – guess what? Tariffs and a slowing economy…. The stock is quoted down $4 or 5.5%. Remember that the 1st qtr. earnings season begins ‘officially’ on April 11th – with JPM and the Big Banks.

European markets are all lower again – down about 0.5%. This morning – we learned that Germany voted to pass a reform package worth $1.1 trillion in order to rebuild their infrastructure and reduce their military reliance on the US. But do not expect it to be all wine and roses – the conservatives and the SPD party jammed this thru ahead of the next Bundestag* that begins on March 25th so there are many members that are NOT happy because they feel like they got run over ahead of the new parliament.

The Bundestag is the federal parliament of Germany representing the ‘people’ and is elected every 4 yrs.

The S&P closed at 5662 down 12 pts…..Again, keep your eyes on 5600…... If we test it and fail – then I suspect we will then test the March low of 5500 but if we test it and hold – then I suspect that we will try to move higher and test trendline resistance at 5743. So, for now – the trading range is 5500/5743.

Remember – the end of the qtr. is only 1 week away, and I expect a fair amount of volatility in the next 6 trading days…..starting with today’s triple witching hour – when three types of options contracts expire simultaneously. It used to be called ‘quadruple witching’ but single stock futures effectively stopped trading in 2020 – so today look for Stock Index Futures, Stock Index Options and Single Stock Options to expire on the closing bell.

Remember – there has been a lot of damage done to the internals, investors and the markets need to time to reassess the landscape…and while I am bullish long term, I keep saying that we should not expect a V shape recovery.

Get comfortable by being a bit uncomfortable, stay defensive while being cautiously optimistic. Stick to your plan, don’t panic and if the recent pullback is causing you undue stress then maybe you need to reconsider your plan….…. Call me to discuss.

Caramelized red onion and Sun-dried tomato cream pasta

(Pasta con Crema di Cipolle Caramellate e Pomodori Secchi)

OMG – talk about spectacular!

For this you need 2 large red onion – sliced thin. 1 jar of sun-dried tomatoes in oil, brown sugar, balsamic vinegar, butter and of course the spaghetti.

Beguin by slicing the onions on a mandolin so that they are uniform. Add to a sauté pan with ½ stick of butter, 1 tblsp of brown sugar, 2 tblspn of balsamic vinegar and let it cook for 30 min on med heat. Stir every 3 mins or so.

Bring a pot of salted water to a rolling boil on the back burner so it’s ready for you.

When the onions are all cooked down, soft and ‘purpoley’ – place ¾ of it in a food processor with the sundried tomatoes and oil. Blend until it becomes like a ‘pesto’ consistency.

Now – add it back to the sauté pan.

Now add ½ lb. of pasta to the water and cook it until aldente. Right before the pasta is done – add a ladle of the pasta water to the onion/tomato mix to thin it out. Now add the hot pasta to the sauté pan and mix to coat. If you need to – you can add another ladle of water if it ‘needs’ it.

Serve in warm bowls topped with some of the remaining onions. Always have fresh grated parmegiana cheese on the table for your guests.