Billionaire Explains Why Stock Market Growth Has Struggled

In a recent interview with CNBC, Gundlach explained that while the Federal Reserve’s interest rate cuts typically stimulate risk assets like stocks, the S&P 500 has failed to capitalize on these moves, losing much of its earlier gains.

Gundlach pointed out that despite the Fed’s efforts to reduce rates starting in the third quarter of 2024, bond yields remain high, and the stock market has shown little improvement.

He described the current situation as unusual, noting that the typical market response to rate cuts—stocks rising—hasn’t materialized this time around. According to him, the issue seems to be the enormous interest costs the government faces, which exceed $3 billion per day.

The U.S. government’s interest expense, which is the amount paid to service its national debt of $36.22 trillion, has become a significant burden. For the fiscal year 2024, the government paid nearly $882 billion in interest, according to the nonpartisan Committee for a Responsible Federal Budget (CRFB).

Gundlach emphasized that this massive debt servicing cost is contributing to the broader market struggles, and he believes the situation will persist, continuing to weigh on market performance.