The US debt has continued to increase and it is now reaching levels that are alarming – the deficit and debt are totally out of control. Mr Jeffrey Gundlach said on CNBC, that the “main reason” there are problems in the bond market (the 3 to 5 year steepness), is that the debt increased to 6% of GDP last year. This could be a serious problem in the next recession. Mr Gundlach said that the the corporate bond market is in much worse shape today than in 2006.
He is now warning that the US government bond market is at risk and of course the US corporate bond market which could fall if there is a recession. A recession or downturn could “spark” a wave of downgrades from investment grade bonds to junk bonds, according to Mr Gundlach. He points out that the national debt is exploding while we have some of the best GDP year over year that we have had in recent years – this is of course a dangerous situation for the Trump administration.
The US GDP expanded by 3.2% according to the Bureau of Economic Analysis. Despite strong GDP growth and strong employment, a US economic slowdown would trigger a situation that would make it necessary for drastic measures. The national debt is now out of control.