Billionaire bond guru Jeffrey Gundlach predicts that Donald Trump will most likely win re-election, but regardless of the presidential race, the U.S. could find itself splintered into more than one country as unrest and acrimony jolt the nation.
"I think the election will go to Donald Trump again," said Gundlach, speaking on a webcast hosted by Rosenberg Research with its founder, David Rosenberg.
Gundlach said he had “far less conviction” about Trump than in 2016, when he "was virtually certain" Trump would win.
"Whoever loses is going to throw a fit, and contest the methods of voting and the election," he said. "I think it will be close enough that it can be litigated. People will be really unhappy on one side. I can easily see demonstrations. I can see rioting and looting, particularly if Donald Trump wins," the DoubleLine Capital CEO predicted.
Gundlach warned about the prospects for the economy if lawmakers aren’t able to design a big fiscal aid package.
“The economy is already in tatters, but it would be a disaster,” he said about a lack of more fiscal aid, MarketWatch reported. “When you use such blunt instruments, like the money spray, the effects for the economy are quite uneven. There’s a big tremor but then there are aftershocks,” Gundlach warned.
He also wondered if frustrated and disgusted Americans could lose faith with democracy.
“People are strongly committed to the concept of democracy and yet China has had massive growth and way better infrastructure under totalitarianism,” Gundlach said. “What are we doing when our outcomes are inferior? Is it possible we could change in that regard? Yes, it is possible. I think we are going to see substantial changes in the next six years,” he said of such possibilities that might even include the U.S. breaking into more than one country.
Meanwhile, he said that he is bearish on long-dated bonds like the 30-year Treasury. "I hate long bonds, but I still think you’re supposed to own some, and in a deflationary environment, you would want your portfolio to have that hedge,” he said.
Longer-dated bonds are sensitive to inflation expectations as rising consumer prices can erode their value.
In a recent tweet, Gundlach noted that since August the 30-year bond has been rising at an annual rate of 200 basis points. If that trend persists, he said, the bonds' year-over-year return in August 2021 will be approximately minus 35%.
Investors should however be protecting against inflation in their portfolios, said Gundlach, and said that Bitcoin and gold were good hedges against that risk, Reuters explained.
Emerging markets — particularly India — are a better place to put money than the U.S. or Europe, which Gundlach called “bad demographics, not very well-run, and vulnerable to another Brexit-type outcome.”
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