Even though Donald Trump kicked off his 2020 presidential campaign last night in Florida in front of a crowd of roughly 20,000, Wall Street isn’t entirely convinced that he’s committed.
Jeffrey Gundlach, who is nicknamed the Bond King and whose firm DoubleLine Capital oversees $115 billion in AUM, told Fox Business
that there’s a chance the president could change his mind. And while
the campaign is launched, Gundlach suggests that Trump might not run,
after all, adding:
“If the economy goes into recession, and he can’t pull it out by removing the tariffs, there’s very little for him to run on.”
Dropping Out Is Not Unheard Of
While
dropping out of a presidential election isn’t common, it’s not
unprecedented, either. A little more than half-a-century ago, Lyndon B.
Johnson announced that he was exiting the presidential race because of
the Vietnam war, having said:
“There is division in the American house now.”
While there may be “partisan divisions” in the U.S. today, it’s proven to only embolden Trump so far.
Even
if Trump were the kind to back down, Gundlach’s theory about the
economy works in the president’s favor. The economy does not appear to
be barreling toward a recession. The Fed announced today that it would
leave interest rates unchanged for now, and stocks took the news
surprisingly well. Investors appear confident that the Fed has their
back and will provide stimulus before it will let the market crash. On
the trade front, there is a renewed optimism that Trump and China’s
President Xi Jinping will reach some sort of compromise at the G20
meeting in Japan.
Bond King Predicts Recession
Gundlach,
meanwhile, believes that economic indicators have weakened to the point
that a recession is 40%-50% likely within the next six-to-12 months. He
points to economic indicators that are predicting “poor” consumer
confidence in the future coupled with the Treasury yield curve, which he
says “has every bit the look of a recession is coming.” If the Fed
decides to cut rates, he says it will be “coincidental with an economic
recession.” Meanwhile, RBC’s Senior Economist says the risk of a recession is “very, very, very low.”
President
Trump, meanwhile, has warned that if he’s not the winner in 2020, the
stock market will crash. The S&P 500 is currently on the path to record-high levels.
Gundlach has another prediction, and that is if the economy doesn’t melt, there will be four more years of President Trump.
source link
