Bond investor Jeffrey Gundlach, the CEO of $149 billion DoubleLine Capital, believes the “biggest risk” for markets in 2020 is Democratic presidential contender Bernie Sanders.
Markets are being whipsawed by geopolitical fears, the U.S.-China trade war and whether the world’s largest economy can avoid a downturn. However, the bond guru believes the Vermont Senator — a standard-bearer for the political left and a top-tier 2020 contender — is something investors should consider a risk.
“I think it’s Bernie Sanders becoming more believed in as a real force, and we have to start taking him more seriously," Gundlach said during his annual “Just Markets” webcast late Tuesday.
Massachusetts Democrat Elizabeth Warren “never rose to that. I was always asked, 'When’s the market going to take Elizabeth Warren seriously?' I said, 'Never, because she’s never going to really have a chance.'”
Sanders, Warren and former Vice President Joe Biden are among the top tier of Democrats who are jockeying to take on President Donald Trump in November. While there’s been some movement among front-runners, support for Sanders — who topped the Democratic field in fundraising last quarter — has remained firm.
“The risk markets and the financial markets broadly will have to deal with the fact that there could be a scare that Bernie Sanders is starting to become a plausible candidate for nomination of the Democratic Party,” Gundlach said, adding that he was “most likely” to secure the nomination.
A few years ago, the 60-year-old billionaire investor gained some notoriety for accurately predicting that Trump would win the 2016 election, before the primaries had concluded.
During the webcast on Tuesday, he made a case that Sanders is “stronger than people think.” He added that the Vermont senator is “authentic” and that as Warren — who he described as “down for the count” — fades, Sanders will be boosted.
The investor pointed to a recent poll that showed former Vice President Joe Biden and Sanders are “neck and neck.” However, Biden is at the top of the leader board on the prediction markets at 42 cents, something Gundlach believes is wrong.
“I seriously do not believe Joe Biden is going to win the nomination. And, so that leads one into a conundrum because Joe Biden seems to be winning on Predictit,” Gundlach said. He noted that Sanders has made progress in the prediction markets, while almost all other candidates have declined.
The question, of course, is would Sanders win the presidency?
According to Gundlach, the outcome of the 2020 election would depend “very largely on the economy. He would really need, to push him into a majority position, you would people to be soured even further on capitalism and more fond of socialism as a broad concept,” he said.
In an interview last month with Yahoo Finance, Gundlach said that his base case is that Trump will win again in 2020 “if the economy holds together.” The billionaire recently put the probability of a recession in the next year at about 35%.
Turning to the markets, Gundlach said his “highest conviction” idea this year is that the U.S. dollar will weaken in 2020.
As such, he favors non-U.S. equity markets and also believes that commodities will do well, noting that he likes the longer-term prospect of gold.