Wall Street's most prominent investors are warning the sky would fall if Sen. Elizabeth Warren wins the presidency in 2020, promising a market sell-off and economic contraction if the Massachusetts Democrat comes out on top.
Paul Tudor Jones sees stocks down 25%. Leon Cooperman quipped the plunge could be so bad that exchange operators will have to keep the market closed. Mark Mobius agrees with Cooperman, saying a 20% or 25% drop "is probably possible" if President Donald Trump doesn't win.
The doomsday claims are so grim, in fact, that they might only be rivaled by what Wall Street said in 2016 about Republican candidate Trump, the man Warren now hopes to beat.
"What the market missed initially with Trump was too much focus on his personality versus his agenda," Ed Mills, policy analyst at Raymond James, told CNBC. "His personality caused most people to assume he had no chance of winning and it was focused on the uncertainty."
"Once there was a discussion of the deregulation, tax cuts and fiscal stimulus, there was a view that 'we don't know what he will do, but it is more likely than not to benefit business and the market,'" Mills added.
Trumped up?
Before Trump's victory over Hillary Clinton, Wall Street was skeptical of the GOP candidate. Analysts emphasized his aggressive trade policies, his unpredictability and fickle policy platform.
Ian Winer, director of Wedbush's equity sales trading in 2016, said at the time that Trump's policies could send the market down 50%. He added that then-candidate Trump's proposed tariff policies could end up hurting average consumers.
"All this would do would be to raise prices on the poor," as it would directly increase the prices of goods, Winer wrote in 2016. "All it really does is impose a tax on U.S. consumers."
"If all the policies are enacted," the S&P's price-earnings ratio "could go as low as 11," which is how you "get to 1,000 on the S&P," Winer wrote. That figure represented a more than 50% decline from where the S&P traded at the time.
But Winer wasn't alone.
J.P. Morgan equity strategist Mislav Matejka wrote ahead of the election that "if Trump wins, markets are likely to fall further – one should not use the Brexit template where stocks bounced quickly."
Barclays Chief Investment Officer Keith Parker wrote that the S&P 500 could fall as much as 11%-13% if Trump wins.
Citigroup Chief Equity Strategist Tobias Levkovich wrote on Nov. 3, 2016, that "the tail risks of a Trump victory or a Democratic 'sweep' could result in a market correction in the 5 percent range (similar to Brexit)."
Those fears manifested themselves on election night, when equity futures sank as it became clear that Trump would beat Clinton. Dow Jones Industrial Average futures fell as much as 800 points on election night before turning around quickly ahead of the open.
Wall Street's early focus on Trump's personality and his unorthodox policy proposals ultimately proved of little concern to investors. Almost overnight Wall Street realized that congressional stalemate would work as a counterbalance to the president-elect's more extreme proposals and his ultimate effect on corporate profits would be positive.
Some, like activist investor Carl Icahn and hedge fund manager Stanley Druckenmiller, were quick to realize the potential upside.
Commerce Secretary Wilbur Ross recalled in 2017 that Icahn was "smarter" than he was on election night because the investor left Trump's victory party to go buy stocks.
"We were with Carl Icahn and some others," recalled Ross, a campaign advisor at the time. "At about 2 in the morning, when the futures market had collapsed, Carl left the party and started buying."
Druckenmiller, meanwhile, shorted bonds and added to his stock positions.
The S&P 500 is up 44% since the 2016 election and hit a record high within the last week.The unemployment rate remains near 50-year lows, corporate profits and GDP growth continue to post better-than-expected growth.
Warren: 'Shoot first, ask questions later'
While the congressional mire and impeachment inquiry acted as a check on many of Trump's policy plans, Wall Street is again petrified at the prospect of a presidential candidate. But this time, it's Elizabeth Warren.
And no other investor has been more vocal about his concern over Warren than Cooperman, a billionaire.
The longtime fund manager kicked off a monthslong spat with the Massachusetts Democrat in September, when he quipped that "they won't open the stock market if Elizabeth Warren is the next president."
He later doubled down on his warnings about Warren and told CNBC in October that stocks would sink 25% if she's elected. He also blasted what he views as her anti-capitalist positions, including a proposed wealth tax.
"I don't need Elizabeth Warren telling me that I'm a deadbeat and that billionaires are deadbeats. The vilification of billionaires makes no sense to me. The world is a substantially better place because of Bill Gates, Michael Bloomberg, David Rubenstein, Bernie Marcus, Ken Langone," he said on Nov. 4.
Warren has jabbed back along the way, arguing that the Cooperman should "pitch in a bit more" to help ensure others have an opportunity to succeed.
But Cooperman isn't alone in seeing big losses for stocks if voters chose Warren.
For fellow billionaire Jones, whose firm sees the S&P 500 swooning to 2,250 if Warren wins, the 2020 race represents an exceptional contest that could prove as significant to markets as Ronald Reagan's.
"It does make a difference. Ronald Reagan, when he became president, was a huge difference to the stock market," Jones said last week. "And I would say who the next president is, is also going to have a huge impact on the economy and the stock market, particularly asset pricing."
"This one is going to be more meaningful than any one certainly in my lifetime," he added.
Of paramount concern to the likes of Jones and Cooperman are the senator's plans to raise taxes and rejuvenate government regulation.
The Massachusetts senator's platform prioritizes an ambitious "Medicare for All" proposal and spending on green energy initiatives. But to pay for the big-ticket items, she's made a wealth tax of 6% on fortunes over 10 figures central to her policy agenda. Such a duty, critics argue, could stifle innovation and unnecessarily punish billionaires merely for their success.
Others worry that corporate profits could slump if a Democrat pushes the tax rate businesses pay back to 35%. Every 1 percentage point change in the effective corporate tax rate would lead to an approximate 1% change in S&P 500 earnings, according to Goldman Sachs.
The investment bank told clients earlier this month that if the 2017 tax cuts are entirely reversed, its baseline 2021 earnings per share estimate of $185 would be reduced by 11% to $164. Trump's landmark Tax Cuts and Jobs Act of 2017 reduced the rate to 21%.
Meanwhile, the U.S. Chamber of Commerce on Tuesday said Warren's private equity reform bill, the Stop Wall Street Looting Act, would result in the loss of 6.2 million jobs to 24.3 million jobs across the country. She's touted her distrust of big banks, Big Tech and Big Pharma over her years on Capitol Hill, marked by inquisitions of big bank CEOs.
But even if Warren's elected president in 2020, the odds her policies are implemented without moderation or Congress checking them may at best be questionable, and at worst, remote.
"It is unknown what she may be able to accomplish, but the potential negative effects can easily be overblown," Raymond James' Mills wrote in an email.
"Until we have greater certainty, I would expect a 'shoot first, ask questions later' mentality," he wrote.