Pimco predicts 'material' drop in stocks if Elizabeth Warren wins Democratic nomination

Key Points
  • The U.S. stock market will fall "in a material way" as soon as it's clear Elizabeth Warren will become the Democratic Party's candidate for the 2020 presidential election, said John Studzinski, Pimco's managing director and vice chairman.
  • Studzinski did not quantify his prediction of a stock market fall, but his forecast differs from most others because it centered on a Warren candidacy — instead of a presidency.
  • Several prominent investors including Leon Cooperman, Marc Lasry and Mark Mobius have projected the stock market to decline by 20% to 30% if Warren is elected president. 
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Markets may fall if Elizabeth Warren becomes Democratic nominee: Pimco

U.S. stock markets will fall "in a material way" as soon as it becomes clear Elizabeth Warren is nominated to be the Democratic Party's presidential candidate for the 2020 election, an investment expert from bond giant Pimco said Tuesday.

"Putting aside whether she was president or not, if she was the Democratic candidate, the stock market will adjust — probably downward — in a material way as soon as that became clear, absolutely. There's no question about it," John Studzinski, Pimco's managing director and vice chairman, told CNBC's "Squawk Box" at the East Tech West conference in the Nansha district of Guangzhou city, China.

Studzinski did not quantify his prediction of a stock market fall, but his forecast differs from most others because it centered on a Warren candidacy — instead of a presidency. Several prominent investors including Leon Cooperman, Marc Lasry and Mark Mobius have projected a 20% to 30% decline in the stock market if Warren were to be elected president.

But like others, the Pimco executive said investors consider U.S. President Donald Trump to be generally pro-business, which "injected a lot of confidence" into the financial markets. That's also a reason why Trump has remained "in a strong political position today," he said.

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Watch Leon Cooperman's full response to Warren's CNBC campaign ad

Warren, a front-runner for the Democratic presidential nomination, has made reining in the excesses of the wealthiest Americans and largest U.S. businesses a centerpiece of her campaign. Several well-known business executives and investors have criticized her plans, saying a Warren presidency would harm financial markets and the economy.

But Studzinski said if Warren wins the Democratic nomination, she may tweak her policies to appeal to "centrist" voters to stand a better chance at beating Trump. Warren, a senator from Massachusetts, is considered by many to be left-leaning.

"My theory is: If she does get the nomination, markets will be nervous about that," he told CNBC's Geoff Cutmore in a conversation about the global investment outlook at the conference. "I will also say that she may well move to the center on many of her policies if she does get the nomination just in order to compete and get the sort of core centrist part of the U.S. Democratic Party."