'Bond King' Jeffrey Gundlach says a recession will strike in the next 4 months

• A recession is coming in the next four months, according to DoubleLine Capital CEO Jeffrey Gundlach.
• Gundlach pointed to turmoil stemming from SVB, which has expedited a downturn.
• Signs of trouble are brewing in the bond market, with the yield curve flashing a classic recession signal.

"Bond King" Jeffrey Gundlach says a a recession will strike in the next four months, as signs of trouble are already beginning to brew in the market.

"With all that's going on I think a recession is probably within four months at the most," the DoubleLine founder said in a Twitter Spaces chat on Thursday, per Reuters.

The bond market has been flashing a recession warning for months, with the 2-year yield surpassing the 10-year yield in October. The inversion of the yield on the short and long-term notes is a notorious predictor of a downturn, but Gundlach said that he had pushed up his timeframe for a coming recession, thanks to further yield moves stemming from the chaos Silicon Valley Bank, which failed last week and taken over by the FDIC in what was the biggest bank collapse since 2008. 

Markets have dialed back their interest rate expectations in response, as Fed officials could be hesitant to keep raising interest rates to avoid putting more pressure on the financial system. 

Lower rates expectations caused a record two-day drop in the 2-year Treasury yield, which posted its largest decline since 2008 the day SVB went under. It's another worrying signal of an incoming downturn, Gundlach said.

"In all the past recessions going back for decades, the yield curve starts de-inverting a few months before recession comes," he said in an interview this week with CNBC. "At this point, with the de-inversion happening, the 4-6 month time window is starting to seem much more plausible."

The Fed has raised rates 450 basis-points over the last year to lower inflation, marking one of the most aggressive rate-hiking cycles in history, and which contributed to SVB's collapse by crushing the value of the bank's bond portfolio. 

Investors are now pricing in a 25 basis-point rate hike at the Fed's next policy meeting, according to the CME FedWatch tool, and 75 basis-points of rate cuts by the end of the year.