Deep Recession to Force Full Percentage-Point Fed Cut, DoubleLine Warns
- Sherman is adding duration, and owns shorter-dated IG credit
- Sherman says loan market, not high yield, will lead defaults
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Markets should brace for a deep US recession that warrants a dramatic one percentage-point interest-rate cut by the Federal Reserve, warned DoubleLine Capital’s Jeffrey Sherman.
It’s a bold call based on weakening economic data that makes a recession probable next year for Sherman, coming even as the Fed is expected to hike further this week. Money markets are already betting on a total 130 basis points of Fed cuts in 2024, but Sherman thinks policymakers will end up being slow to act and then have to unleash the biggest cut since the pandemic struck.