Most probably the United States President Donald Trump will win re-election. Nevertheless, the outcome of the presidential race might not matter. This is because the United States could find itself broken into more than one country. Acrimony and unrest are gripping the electorate. That is what Investor Jeffrey Gundlach said on Monday.
Gundlach spoke on a webcast hosted by Rosenberg Research with its founder, David Rosenberg. Gundlach said that he had far less conviction concerning Trump than in 2016. During that time, he was one of a handful of people taking the long-shot candidacy of Trump seriously.
Previously, Gundlach has shared his views on the election. Nevertheless, in conversation with Rosenberg, a noted economist, he weighed in on the prospects for the economy if Washington is not able to deliver a big enough financial aid package. Gundlach said that the already economy is in tatters. Nevertheless, it will be a disaster. He continued that when you use such blunt instruments (money spray), the effects for the economy might be quite uneven. There is a significant tremor then there are aftershocks.
Gundlach has a slightly longer-term out outlook and perhaps more ominous than any outcome he forecasts over the next year or so.
There is another question: is there a chance that America will lose faith in democracy. Gundlach mused that people are strongly committed to the concept of democracy. Nevertheless, China has had massive growth and way better infrastructure under totalitarianism. Gundlach thinks that they are going to see substantial changes in the next six years. Moreover, he said that it might include the United States breaking into more than one country.
Gundlach added that they are going to break away from a paradigm they have been in for the past decades or so. It was Characterized by what Pimco called ‘the new normal’: stable inflation, exceptionally low market volatility, and 2-2.5% GDP growth.
2017 was the calmest stock market of all time. The narrative had been developed that the market had structurally changed. Nevertheless, it can be consistent. Moreover, Gundlach said that there was a narrative that VIX will not go above 15 again.
Cboe Volatility Index, or VIX, measures expected volatility for the S&P 500 in the coming 30-day period. Late Monday, it stood near 37, well above its long-term average of 19.
Furthermore, as the dollar weakens, gold will provide a good hedge. Emerging markets (particularly India) are a better place to put money than Europe or the United States. It is because it outperformed United States equities for the past decade.
- Trading Instrument