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Stanley Druckenmiller: If 'Crazy' Democrat Beats Trump, Stocks Will Drop 'a Lot'

Stanley Druckenmiller: If 'Crazy' Democrat Beats Trump, Stocks Will Drop 'a Lot'
(Alex Brandon/AP)

By    |   Tuesday, 04 June 2019 02:17 PM

Billionaire Stan Druckenmiller warned that if one of the “crazy” Democrat presidential candidates beats President Donald Trump in 2020, the stock market could see a big sell-off.

Druckenmiller, who was interviewed by Key Square Capital Management founder Scott Bessent at The Economic Club of New York, said he wouldn’t say whether the U.S. is headed for a recession but that he sees many warning signs. He’s concerned that Trump broke a fragile economy going into the next election and assumes he won’t be re-elected in 2020.

“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 told Key Square Capital Management founder Scott Bessent at The Economic Club of New York, CNBC explained.

P-E is shorthand for the price-earnings ratio, a metric used by investors to gauge the relative expensiveness of securities, CNBC explained. "When P-Es are high, investors believe the growth outlook for the economy is strong and are willing to pay more for each dollar of earnings. It’s the viewpoint of Druckenmiller and other hedge fund managers that a far left candidate would reduce investors’ appetite for paying up for stocks," CNBC explained.

Meanwhile, Druckenmiller  also said he could see the Fed funds rate going to zero in the next 18 months if the economy softens and that he recently piled into Treasuries as the trade war with China escalated, Bloomberg reported.

“When the Trump tweet went out, I went from 93% invested to net flat, and bought a bunch of Treasuries,” Druckenmiller said Monday evening, referring to a tweet from the president on China. “Not because I’m trying to make money, I just don’t want to play in this environment.”

Druckenmiller, the former chief strategist for George Soros, decided to convert his hedge fund into Duquesne Family Office in 2010. His long-term track record, making returns of about 30% a year over three decades, established him as one of the world’s top money mangers.

In December, he warned that trading conditions could worsen, and that while the indicators he historically used were not red yet -- they were decidedly amber. He also urged the Federal Reserve not to raise rates in December. The central bank did not follow his advice, though it has kept interest rates steady so far this year.

In recent years he’s become more bearish on the future of the industry that made him a billionaire. He said last year that the rise of computer trading and influx of managers have made it harder to make money. Quants are generating short terms swings in the market that can create a “nightmare” for discretionary managers hunting for trends.

Druckenmiller, 65, has a net worth of $5.1 billion, according to the Bloomberg Billionaires Index.

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Billionaire Stan Druckenmiller warned that if one of the “crazy” Democrat presidential candidates beats President Donald Trump in 2020, the stock market could see a big sell-off.
druckenmiller, crazy, democrat, trump, stocks
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2019-17-04
Tuesday, 04 June 2019 02:17 PM
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