Virtus Capital president says markets would sell off big if a ‘socialist’ is elected president

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South Bend, Indiana Mayor Pete Buttigieg and Sen. Elizabeth Warren (D-MA) speak during the Democratic Presidential Debate at Tyler Perry Studios November 20, 2019 in Atlanta, Georgia. Ten Democratic presidential hopefuls were chosen from the larger field of candidates to participate in the debate hosted by MSNBC and The Washington Post.

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Steven Gidumal, managing partner of Virtus Capital, said Monday that if Bernie Sanders, Elizabeth Warren or Pete Buttigieg is elected president, the market would sell off between 30% to 50%.

“If a Socialist is Elected, the Market will sell off BIG,” Gidumal said in a slide presentation. “Pick a Socialist – Bernie, Liz, Pete. etc. and the Market would sell off.” 

Warren and Buttigieg have both said they are not socialists.

Speaking at the annual Distressed Investing Conference in Midtown Manhattan, Gidumal also said that he thinks markets are signaling a re-election of President Donald Trump and thinks the president making public comments on the Federal Reserve is the right thing to do.

“One of the best things the administration has done across all the parties is jawboning the Fed to keep interest rates down,” Gidumal said.

Gidumal’s presentation to a room full of distressed debt investors, corporate restructuring professionals and lenders, focused on the past year and what to expect in the distressed investing space in the coming year.

Gidumal is also president of Virtus, a New York-based hedge fund specializing in restructurings and distressed securities. He said the coming year could be choppy for investors, particularly as so many different factions may want to pull the market and the U.S. economy down.

He said he doesn’t think a recession will hit in 2020, but rather, “it will probably hit in the first quarter of 2021.”

In closing his presentation, Gidumal refocused his attention to what to watch for in 2020 with election and the Fed being his top bullet points.

“I think Trump is absolutely right to bash the Fed and to do it publicly because a lot of what they do is irrational and has been for the past century,” Gidumal told the audience.

Gidumal believes the Fed wants to raise rates, and may want to do it before the election, but slowing world and U.S. growth should stop them.

“We continue to view the Fed as a political operation, not a market-based, growth oriented, pro-US rational body,” the presentation slide read.

The presentation kicked off the 26th annual event hosted by the Beard Group in which Gidumal has spoken at for 22 of those years. In 2007, a fund managed by Gidumal was ranked the number one fund in the U.S. in its category by Hedge Fund Research Institute.

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