Gundlach blames Bernie Sanders for sell-off, cites ‘dark side of momentum investing’


Jeffrey Gundlach, DoubleLine Capital CEO and Wall Road “Bond King,” is pointing the finger at presidential hopeful Bernie Sanders for the market’s tumultuous rout this week.

“If this inventory current market reversal is due completely to the virus, then why is United Healthcare down considerably more than SPX? Why is healthcare as a sector broadly not outperforming? Reply to these queries: the industry is digesting a far better than 50% possibility of Bernie having the nomination,” Gundlach wrote in an e mail to CNBC’s Scott Wapner on Wednesday.

Whilst the important inventory averages rose somewhat on Wednesday, it has been a dismal week for shares as traders stress about a dent to international economic development owing to the coronavirus. The S&P 500 wiped out a whopping $1.7 trillion in just two sessions previously this 7 days. The equity benchmark nosedived 6.3% in two times, struggling its most important two-day fall given that August 2015.

All the even though, Vermont Senator Sanders has opened up a double-digit direct nationally over his closest rivals in the Democratic presidential principal, according to an NBC Information/Wall Road Journal poll unveiled very last week. Sanders has the assistance of 27% of Democratic principal voters, a figure which is unchanged from January, the survey identified.

“Probably this is the darkish aspect of momentum investing (which is particularly what defines “passive”),” Gundlach wrote. “The industry goes down in a knee jerk way on the Bernie rise, but the market place likely down can make Bernie’s polls go up on his rejection of a sector based mostly economic climate. Which will make the industry go down another leg. Rinse and repeat.”

Gundlach has formerly reported that the Vermont Senator is the largest risk to the financial markets in 2020. Sanders, a self proclaimed “Democratic Socialist,” is pushing for insurance policies which includes higher taxes on the rich, breaking up massive banks and a $15 for every hour minimum amount wage. Sanders has also vowed to get on the pharmaceutical marketplace. 

Gundlach went on to say he pitied the Federal Reserve, who decreased desire rates 3 times past yr in purchase to sustain the financial enlargement. 

“Just weeks just after finally getting in a position to expression the present policy stance “ideal” and “in a excellent position” the bond current market is asserting that present policy is, in reality (to quote Joe Biden), in require of considerable adjustment,” Gundlach wrote. 

If commodity charges, specially oil costs, keep on their modern weakness, Powell will have to pivot once more quickly, in accordance to Gundlach. 

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