Gundlach: Inflation Will be Above 5% for 2021

There is at least a 50/50 chance that headline CPI inflation will exceed 5% for all of 2021, according to Jeffrey Gundlach. He also predicted that neither Joe Biden nor Donald Trump will be on the presidential ticket in 2024.

Gundlach spoke via a webcast as the opening keynote for the Advisor Perspectives 2021 Thought Leader Summit. You can view a replay of his session and register for other CE-eligible sessions here. Gundlach is the founder and chairman of Los Angeles-based DoubleLine Capital.

Inflation will not be transitory, as the Fed has previously claimed. That is evident, he said, by the fact that the Fed has already backtracked on its definition of “transitory,” adopting the view that inflation will be more persistent than it originally believed.

The PPI has increased 9.6% year-over-year, and the headline CPI is up 5.4%.

The CPI has lagged in its incorporation of the increasing costs of home ownership. Prices of homes are rising rapidly across the U.S., he said, and CPI’s use of owner-equivalent rent does not reflect this.

The health of the economy and the direction of interest rates

The economy is healthy, Gundlach said, but only because it is buoyed by government support and deficit spending. GDP has bounced back through many rounds of stimulus, he said, but most of it is from consumption. Our trade deficit has expanded by 3% of GDP since the onset of the pandemic because the Chinese economy improved and imported goods to the U.S.