Another “stealth” goal never mentioned by Fed officials but always on investors’ minds has been the stock market. Whenever equity prices have fallen 20% or 30% since the 1990s, it turns out to be a “reaction point” and Fed policy pivots to support markets.

Gundlach’s biggest fear is that when signs of a slowdown surface, the Fed will resort to its old money-printing ways. “Every time, we do more of it,” he said.

Even if the Fed raises rates four times by late summer, the next recession is likely to start at fairly low interest rate levels. That will lead to “another bailout, which is the only tool they know.”

America’s inflation problems are truly global in nature. Europe and emerging markets are major victims.

Inflation surprises all over the world are at “levels never seen before,” Gundlach said. The U.S. dollar is up 10% in the last year, compounding cost pressures for emerging markets that pay for oil and other commodities in dollars.

When it comes to Russia’s invasion of the Ukraine, Gundlach gave the Biden administration low marks. “Announcing in December that there would be no U.S. troops going into Ukraine is the reason Russia invaded,” he said. “I worry Taiwan [is] in the balance.”

The good news is that the Russian military is performing so poorly that it may cause China to “think twice” about “how easy it is to do these things.” Ultimately, he added, Russia is likely to take over Ukraine because the U.S. will opt not to impose a no-fly zone, “which we are loath to do for very good reasons.”

Over the near term, Gundlach thinks the stock market may be approaching a bottom, with the Nasdaq in bear market territory. He advised U.S. investors to dollar-cost average into emerging market equities.

On the political front, he suspects the midterm elections will be one of “the biggest disasters for the current administration” in his lifetime, thanks in large measure to inflation. A shift away from the 50-50 deadlock in Congress could be a positive development, he added.

Looking forward three years, Gundlach, who famously predicted Donald Trump’s election in 2016, said the next president is unlikely to be either Biden or Trump. With both major parties splintering, a third party is a distinct possibility and the upshot could be that the election is not decided by the Electoral College but in the House of Representatives.

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