Renowned investor Bill Gross, often dubbed the “Bond King,” has a bold prediction about the U.S. economy. According to Gross, a recession is looming in the fourth quarter of this year, driven by troubling signs of a cooling economy.

“Regional bank carnage and recent rise in auto delinquencies to long-term historical highs indicate U.S. economy slowing significantly. Recession in 4th quarter,” he recently tweeted.

Gross, co-founder of investment management firm Pacific Investment Management Co. (PIMCO), based his forecast on several key indicators, which have led him to conclude that the U.S. economy is significantly slowing down, pushing it into a recession during the fourth quarter, Business Insider reported. Gross says he is preparing for the forthcoming economic challenges by investing in various bonds across the Treasury yield curve. Gross is also exploring SOFR (Secured Overnight Financing Rate) futures, which are contracts linked to a floating rate lending benchmark. As for equities, Gross is focusing on equity arbitrage, Business Insider reported.

Gross is the author of “Bill Gross on Investing, Everything You’ve Heard About Investing Is Wrong! and I’m Still Standing.” He is credited with creating the first investable market for fixed income securities accessible to all investors, Investopedia reported.

Gross’s insights into an impending recession underscore the need for investors to consider a range of strategies to navigate evolving market conditions. The state of the economy have caused a number of things.

For one, there has been a recent surge in delinquency rates on auto loans in the U.S., which has caused concerns about the financial challenges faced by car owners. With interest rate hikes and rising inflation, many Americans are finding it increasingly difficult to afford their monthly car payments.

The data indicates that a troubling trend has emerged among subprime auto borrowers. In September, 6.11 percent of these borrowers were at least 60 days behind on their auto loan payments, marking the highest level since 1994, PYMTS reported.

The Federal Reserve’s stance on keeping interest rates higher for an extended period has only exacerbated the challenges faced by subprime borrowers. Borrowers must allocate their income to meet multiple obligations, including car payments.

As delinquencies on auto loans continue to rise, the number of vehicle repossessions is expected to also increase. This situation reflects the financial strain faced by car owners, underscoring the challenges they encounter in a changing economic landscape.

The housing market is also affected, as high mortgage rates have led homeowners to hang onto their homes rather than selling, which contributes to price stability.

Bill Gross (Photo: Bill Gross website, https://williamhgross.com/about/)