Bernie Sanders Is The Biggest Market Risk Of 2020, Gundlach Says

U.S. Sen. Bernie Sanders may have a real chance at becoming the next president of the United States, and DoubleLine CEO Jeffrey Gundlach said Tuesday that Sanders poses the single biggest risk to U.S. financial markets in 2020.

Benzinga · 01/08/2020 16:13

U.S. Sen. Bernie Sanders may have a real chance at becoming the next president of the United States, and DoubleLine CEO Jeffrey Gundlach said Tuesday that Sanders poses the single biggest risk to U.S. financial markets in 2020.

In an investor webcast this week, the billionaire investor said Sanders is a stronger candidate for the Democratic nomination and a larger threat to Wall Street than investors seem to realize.

“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 the nomination,” he said.

Sanders' Proposals

Sanders has proposed legislation that could create headwinds for Wall Street, including restrictions on stock buybacks, higher taxes on the wealthy, a $15 nationwide minimum wage and a breakup of the largest banks.

The Democratic candidate has also proposed a financial transaction tax that would tax all stock trades at 0.5%, all bond trades at 0.1% and all derivative trades at 0.005%.

Former Vice President Joe Biden is leading the race of Democratic candidates with a 42% chance of securing the nomination, according to PredictIt. Sanders is in second place at a 31% chance followed by Pete Buttigieg in a distant third at 12%.

When it comes to the general election, the chances of Democrats taking back the White House from Donald Trump stand at exactly 50/50.

The election will ultimately come down to how the U.S. economy performs in 2020, Gundlach said. 

Gundlach's Other Predictions

In addition to his concerns about Sanders, Gundlach made a handful of other market predictions for 2020. He anticipates a weaker U.S. dollar and outperformance in emerging market stocks and bonds.

At least in the first full week of trading in 2020, Gundlach’s predictions have yet to come to fruition. The SPDR S&P 500 ETF Trust (NYSE: SPY) is up 0.4%, the INVESCO DB USD /BULLISH FD (NYSE: UUP) is up 0.5% and the iShares MSCI Emerging Markets Indx (NYSE: EEM) is down 0.2%.

Benzinga’s Take

While some of Sanders’ most socialist policy proposals may seem scary for investors, it may be extremely difficult for Sanders to push through many of those policies even if he secures the White House. Republicans have a 72% chance of maintaining control of the Senate after the election, according to PredictIt.

Do you agree or disagree with these predictions? Email feedback@benzinga.com with your thoughts.

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U.S. Sen. Bernie Sanders. Benzinga file photo by Dustin Blitchok.