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Paul Tudor Jones, Steve Cohen Warn of Market Rout on Warren

Katia Porzecanski and Melissa Karsh
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Paul Tudor Jones, Steve Cohen Warn of Market Rout on Warren

(Bloomberg) -- Billionaires Paul Tudor Jones and Steve Cohen joined a growing number of hedge fund managers warning that the stock market would tank on the prospect of an Elizabeth Warren presidency.

The S&P 500 Index will drop about 25% if the Democratic senator wins the 2020 election, mostly because of concern over her proposed wealth tax, Jones said Monday at the Robin Hood Investors Conference in New York, according to people with knowledge of his presentation. Jones, citing an internal poll at his $8 billion macro hedge fund, also said economic growth in the U.S. would fall to 1% from estimates of more than 2% this year.

At the same conference, and in response to Jones, Cohen said the market would begin pricing in a Warren victory much sooner, tumbling 10% to 15% if she wins the nomination, according to people with knowledge of his remarks. Cohen added that despite the market’s concern surrounding Warren, some of her more extreme proposals will be difficult to achieve.

Warren, who advocates for a 2% tax on America’s richest families, “Medicare for all” and new regulations on private equity, is stoking fear on Wall Street as she’s gained momentum. Macro hedge fund manager Rob Citrone said last week that she could send the market down from 10% to 20% if she’s leading into the February primaries. Billionaire Leon Cooperman told CNBC earlier this month that the market would drop 25% if Warren or Bernie Sanders win.

Trump Prediction

Jones said that his poll found that the election of Sanders, a self-described “democratic socialist,” would cause the markets to tumble about 20%. Cohen disagreed, saying the sell-off following a Sanders election would be more extreme than a Warren win.

Warren’s more centrist opponents for the nomination -- Joe Biden, Pete Buttigieg and Amy Klobuchar -- would drag down the market by around 10%, Jones told the audience.

The re-election of President Donald Trump would boost the S&P to 3,600, he said -- representing an 18% jump from the index’s record high of 3,039 at the end of trading Monday.

Because of the unpredictable and binary nature of trading around the election, Cohen said he would want his traders to head into the period with less exposure. A wrong way bet could be career ending, he said.

‘Hunker Down’

As a result, he said he expects next year to be a tough one to make money.

“People will hunker down and see what happens,” said Cohen, who runs the $15 billion hedge fund Point72 Asset Management. “You’re probably going to have to grind it out next year. That’s just the way it is.”

Back in 2016, several marquee hedge fund managers had anticipated markets would plunge on a Trump victory. Billionaire hedge fund manager Paul Singer said Trump’s anti-trade policies would be “close to a guarantee” of a global depression. Ray Dalio’s Bridgewater Associates, which runs the world’s biggest hedge fund, told investors it expected about a 10% drop in U.S. equities if Trump won the election, while Appaloosa Management’s David Tepper said the S&P 500 could drop to 2,040 if Trump prevailed.

Instead, the S&P has yet to close below its Nov. 8, 2016 level, and has handed investors 51% returns since the election.

No Endorsements

As of June, Cohen hadn’t made any political donations or endorsements to specific candidates in the 2020 election cycle, according to OpenSecrets.org. He was a major supporter of a super-PAC that promoted former New Jersey Governor Chris Christie’s campaign in 2016 and donated to GOP campaigns and super-PACs aligned with House and Senate Republicans in 2018 and 2017, records show.

At a gala last week, Jones -- who has given to Republicans and Democrats in the past -- raved about Democratic presidential candidate Buttigieg. He said of the 37-year-old mayor of South Bend, Indiana: “He’s my man.”

“I love Pete, I love Mayor Pete, because I think he would be the best administrator to run this country, and he’s got a compassionate heart,” added Jones. “I’m not politically active at all. But right now he’s getting me excited.”

Earlier in the conference, Jones, 65, said he had no idea who would win the election and had no strong feeling on the market. The former cotton trader said that he’s continuing to bet on gold. He told Bloomberg in June that betting on the precious metal is his favorite pick for the next 12 to 24 months, and prices have jumped about 11% since then. He also said Monday that he expects another U.S. interest rate cut and some profit-taking to follow, then a market rally to finish the year.

(Updates with Cohen’s past political donations in 13th paragraph.)

To contact the reporters on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net;Melissa Karsh in New York at mkarsh@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Josh Friedman, Vincent Bielski

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