Former Duquesne Capital Chair Stanley Druckenmiller thinks President Donald Trump is going to lose his reelection bid, and he warned that when one of the “crazy” far-left Democrat candidates wins it will crash the stock market.
The problem for Trump, Druckenmiller said, are the swing states that swung Trump’s way in 2016 will now swing back toward the Democrats, and particularly those among the far left like Bernie Sanders, I-Vt.
Druckenmiller said he just hopes the winner is more centrist and not pushing a socialist agenda.
“I think if he does lose, particularly if I’m wrong and a crazy beats him, I mean it’s worth a lot of P/E points. A lot,” he said, referring to the price-earnings ratio used by investors to gauge true value of a stock.
When a P/E is high, it’s a sign that the growth outlook for the economy is strong, so investors are willing to pay more for each dollar of earnings. Druckenmiller, who produced 30% annualized returns as a hedge fund manager, and other fund managers agree that a far-left candidate would pour cold water on investor appetites to buy stocks.
While Druckenmiller prefers a Trump win, he said he thinks he got lucky in 2016 and won’t fare as well against a centrist candidate like former Vice President Joe Biden, who is the front-runner in most polls ahead of Sanders.
“I personally think it’s going to depend on the Democratic candidate, but he drew an inside straight: he won seven out of seven states by less than half a percent,” Druckenmiller said. “If you go county by county in Pennsylvania, Michigan and Wisconsin, he is in deep, deep, deep trouble. And that was with the economy growing at 3%.”
Unless the Democrats’ “two, three crazies — I can’t remember how many there are — I’m assuming he’s going to get beat,” Druckenmiller said Monday. “I think the market assumes” Trump will win reelection, he said.