“Bond King” Jeffrey Gundlach sees one specific thing — or person, rather — that is the single biggest risk to U.S. stock markets in 2020: Democratic primary candidate Bernie Sanders and his potential for a run at the White House.
Markets have already been rocked by volatility the past year from geopolitical forces like the U.S.-China trade war and more recently by tensions with Iran. But “the biggest” risk, to Gundlach, is the continued rise of Sanders, a self-described Democratic Socialist who has steadily been running second or third in nearly all major polls.
In the latest Real Clear Politics polling, former Vice President Joe Biden is still leading the pack at 29.3%, followed by Sanders, who lapped the Democratic field in fundraising last quarter, who is at 20.3%.
“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 “Just Markets” webcast this week.
Massachusetts Sen. Elizabeth Warren, who had surged into a virtual dead heat with Biden back in October, has slid all the way back to 14.8%.
Warren “never rose to that,” Gundlach said of her fundraising compared to Sanders’. “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.'”
South Bend, Indiana, Mayor Pete Buttigieg is fourth at 7.5%, and former New York Mayor Michael Bloomberg is fifth at 5.8%.
“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, who predicted a Trump win in 2016, said before adding Sanders is “most likely” to win the primary. Gundlach has never been high on “Slidin’ Biden’s” chances, as the Bond King often refers to the former vice president and long-time senator.
“I seriously do not believe Joe Biden is going to win the nomination,” he said. “And so that leads one into a conundrum because Joe Biden seems to be winning on PredictIt.”
Gundlach’s logic in picking Sanders is, in addition to him gaining in polling while other candidates have slid back to the pack, is because he’s “stronger than people think,” and he’s “authentic.”
But could Sanders beat Trump head-to-head?
The outcome would depend “very largely on the economy,” Gundlach said. “He would really need to push him into a majority position, you would need people to be soured even further on capitalism and more fond of socialism as a broad concept.”
Gundlach most recently put his odds for a recession starting this year at 35%.