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It doesn’t matter who wins the White House in 2024, the country’s debt position will still be terrible and must be addressed or else, warns the “bond king.”
“A Republican coming into the White House, how is that going to help [our debt issue]? We run these deficits under every administration. It is basically a disease that we believe we can run a $2 trillion budget deficit in perpetuity. I don’t think that is a Republican versus Democrat issue. I think it is a mathematician versus pseudo-economist issue,” DoubleLine founder and CEO Jeffrey Gundlach said at the Yahoo Finance Invest conference this week.
Gundlach was answering a question on if a Republican in the White House in 2024 would be best served to slash government spending and address the country’s yawning debt pile.
“People have to really experience a crack of doom sort of moment, that they realize that this is not sustainable,” added Gundlach.
The veteran money manager thinks investors would be better served right now putting their funds into non US stocks, and shying away from market darlings like Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla (aka The Magnificent 7).
While many doomsayers have warned about the country’s rising debt for decades, it has become so large post-pandemic that it’s beginning to weigh heavily on the decision-making process of some investment pros.
The national debt is sitting at more than $33 trillion, according to data from the Treasury. That’s more than quintuple the $5.8 billion seen in the 2001 fiscal year.
In part, the concern reflects the impact of higher interest rates — as put in motion by the Federal Reserve — making debt servicing costs higher. Aggressive government spending on new infrastructure plans has only saddled the country with even more debt.
At some point, experts warn, the government will be forced to materially hike taxes and cut social programs such as Social Security to address the ballooning debt pile. Of course, going that route would harm the economy and unleash waves of volatility across global asset markets.
Gundlach isn’t alone in getting worried, Corporate America is starting to be vocal on the matter too.
“I think it’s a problem today. I don’t think it’s a problem 30 years from now.” AT&T CEO John Stankey said at Invest. “I don’t know that we can pick a day and say that things are going to trip. I think the day of reckoning is we’ll end up being in a prolonged period of suboptimal growth.”
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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