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Bond King Says Trump Might Drop Out of 2020 Election if Economy Falters

Last Updated September 23, 2020 12:47 PM
Gerelyn Terzo
Last Updated September 23, 2020 12:47 PM

By CCN.com: 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.