Back at the start of 2016, when nobody else would even consider such an outcome, DoubleLine Capital CEO Jeff Gundlach shocked the economic, financial and political establishments when during the January Barron's roundtable of that year, he predicted that Donald Trump would become the next US president. He was right.
Fast forward to today when one week before the elections, and in an environment when most polls predict that Biden will crush Trump and where Nate Silver gives Trump just a 13% chance of defeating Biden, Jeffrey Gundlach is predicting another victory for President Donald Trump.
As Financial Advisor magazine reported, during a Tuesday webcast as part of Schwab’s 2020 IMPACT conference, Gundlach said that despite polls, analysis and betting odds that suggest otherwise, Trump is likely to outpace former Democratic vice president Joe Biden in the contest.
"The polls right now say he isn’t going to win, but they said that four years ago," said Gundlach referring to the following chart.
"Mind you, my conviction is way lower than it was four years ago. But back in [that period], when Trump was little more than an asterisk in the betting odds, I predicted he was going to win. This one is much more murky, but in my eyes, it favors a Trump win."
Addressing the elephant in the room, Gundlach said that public political polls are often "designed to create impressions" rather than illustrate reality, said Gundlach, and shouldn’t be trusted (for more on this read our post from 2016 "New Podesta Email Exposes Playbook For Rigging Polls Through "Oversamples"). He also argued that many Trump voters are unwilling to engage with pollsters and the media because they fear retribution for their political beliefs, also known as the "shy voter" phenomenon according to which "Over 10% Of Trump Voters Won't Admit Preferences To Pollsters." Biden also faces an enthusiasm problem, said Gundlach.
Gundlach then went on to crush hopes of a Blue Wave, arguing that Republicans will likely keep the Senate regardless of who wins – mainly because of uncertainty around Biden. "Some people will hedge their bets and split their vote towards retaining the Republican Senate because they view Biden as risky," said Gundlach, who noted that Trump is often portrayed as riskier than Biden. And yet, in the four years of his presidency, there have been no international conflicts, despite some outrageous and bellicose language.
"You might dislike Trump or some of his policies, but risk is not what you’re getting with him, particularly compared to turning the presidency over to another party, and particularly when that party’s candidate isn’t saying what some of his policy positions are."
If Gundlach is wrong, and Biden wins the election and eventually rolls back or eliminates the corporate tax reduction from 2017’s Tax Cuts and Jobs Act, U.S. equity valuations would increase sharply, said the DoubleLine CEO, but he added that the reduction in after-tax earnings would mean that stock prices would not appreciate. Interest rates, volatility and inflation would also rise, said Gundlach.
"Markets don’t like certainty, and with Trump, I think you have more certainty,” said Gundlach. “With Biden, you have peak uncertainty because there’s been very little information given to the public.”
Gundlach clarified that he doesn’t think Biden is a socialist, but that pressured by the Democratic Party’s base, his administration would pursue higher taxation and “socialist policies,” but it’s hard to be sure because Biden has changed many of his positions over his long political career.
The opposite is true of Biden’s running mate, California Senator Kamala Harris, who Gundlach called “one of the most left-leaning people in all of the Senate” who is not shy about sharing her opinions.
Gundlach then said that Americans should consider the all too real possibility that a Biden victory means that at some point within the next four years, Harris will ascend to the presidency.
"We have to discount the probability of outright socialist policies with outrageous amount of deficit spending,” said Gundlach. "That would pose a big problem for stock and bond markets."
Yet no matter who the winners is on Nov 3, Gundach said that 2020 is just another in a series of election cycles that have increased in their tumult and oddity.
At this point Gundlach went "full Zero Hedge", and predicted that by 2027, economic inequality, strained by fiscal and monetary policy, would come to the point of some sort of revolution, which would put the 2024 presidential election directly in the path of massive social, economic and political change. Which, incidentally, is more or less everything that we have been saying for the past 12 years.
"When I said that I think Trump is going to win in 2016, I also said that if you think 2016 is weird, just wait for 2020,” said Gundlach.
"Well, if you think 2020 is weird, just wait until 2024. You ain’t seen nothing yet."