Dow (DJIA) futures contracts traded cautiously higher before the bell on Tuesday. It comes after a day of heavy selling that saw 200 points wiped off the stock market index.
Traders are rattled by fears of manufacturing slowdown, recession, and the never-ending trade war with China. But fund manager Steven Gidumal threw another warning sign into the mix: the prospect of a ‘socialist’ White House in 2020.
If a socialist is elected, the market will sell off BIG… Pick a socialist – Bernie, Liz, Pete. etc. and the market would sell off.
Gidumal is, of course, talking about Democratic candidates Bernie Sanders, Elizabeth Warren, and Pete Buttigieg. He went on to quantify the sell-off at 30-50% if one of the left-leaning candidates took the White House from Trump.
Dow futures contracts struggled for traction on Tuesday morning, trading almost completely flat in the early hours. Traders are still dusting themselves off after a brutal 200 point massacre on Monday, triggered by weak manufacturing data and Trump’s tariff threat on Brazil and Argentina.
Steven Gidumal isn’t the first Wall Street veteran to spread fear of a Democratic White House. Billionaire Leon Cooperman has been the most vocal on the topic, singling out Elizabeth Warren as a threat to the Dow and S&P 500.
They won’t open the stock market if Elizabeth Warren is the next president.
Hedge fund manager Marc Lasry joined the chorus of Warren-bashers, predicting a 10-25% stock market collapse if she were elected.
You should go short the market the minute it’s clear that Warren’s the nominee. That’s when the market is going to realize there is a real possibility.
Elizabeth Warren’s tax proposals, coupled with her plan to break up big tech companies, has investors feeling nervous.
For now, traders are pricing in a victory for Donald Trump. The Dow Jones has returned 41% since his inauguration in January 2017 and reached record highs last month.
As for the Democratic nomination, traders would certainly prefer a moderate candidate like Joe Biden or new entrant Michael Bloomberg. Biden remains the top candidate in national polls and betting markets. Despite briefly overtaking Biden in late September, Warren’s popularity has dwindled and she is now polling below Sanders.
This article was edited by Samburaj Das.
Last modified: January 22, 2020 11:41 PM