Billionaire Warns Investors of 'Biggest Risk' for 2020: Bernie Sanders
Billionaire bond investor Jeffrey Gundlach, the CEO of $149 billion DoubleLine Capital, is warning investors that the biggest risk markets will face in 2020 is the possibility that Bernie Sanders "will become a plausible candidate" for the 2020 Democratic presidential nomination.
To date, investors haven't worried much about the Vermont senator because he and the rest of the Democratic field have trailed former Vice President Joe Biden badly in the polls. But unlike Elizabeth Warren and other candidates, Sanders' support has remained consistent.
“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.'”
Warren has been examined and rejected by the far left for not being radical enough. But as Sanders maintains consistent support, more and more Democrats are beginning to take him seriously.
“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.
Gundlach achieved some notoriety in 2016 when he correctly predicted Trump would win the presidency even before the GOP nominating contests had concluded. Now, he's predicting that Sanders will come out on top in the Democratic primary races.
But can he 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%.
With the vagaries of international events and the economy being somewhat at their mercy, that's actually not a bad bet. But those who have been hoping for a recession have been bitterly disappointed as the U.S. economy continues to chug along, growing modestly and creating jobs.
I find it significant that Gundlach believes that just the threat of Sanders being taken seriously as a presidential candidate is enough to make the markets flinch. Will the ordinary voter feel the same unease felt by Gundlach? That fear may yet deny Sanders the top spot. But it's clear that his candidacy has already yanked the Democratic Party even farther left, so even if Sanders fails, his ideas will be all over the platform document the Democrats present to the voters later this year.