The Few on Wall Street Who Predicted a Donald Trump Victory

wsj.com/articles/the-few-on-wall-street-who-predicted-a-donald-trump-victory-1478773802

Nov. 10, 2016 5:30 a.m. ET

Donald Trumps victory shocked much of Wall Street. But not Jeffrey Gundlach.
Mr. Gundlach, who runs asset manager DoubleLine Capital LP, has for months predicted the New York
businessman would win the White House. At a time when bond yields were falling to record lows and few investors
even took Mr. Trumps candidacy seriously, Mr. Gundlach was selling long-term U.S. bonds.
He contended their yields were certain to rise, thanks in part to his expectation that U.S. deficits would surge as Mr.
Trumps broadly sketched plans to cut taxes and increase spending on U.S. infrastructure improvements are
enacted.
On Wednesday, even as stocks shrugged off the initial shock of the Trump victory, the yield on the 10-year U.S.
Treasury note hit 2.05%, surpassing 2% for the first time since March. Yields rise when prices fall.
We knew Trump would win and that it would hurt bonds, Mr. Gundlach said. I told you so.
Mr. Gundlach, who says he voted for Mr. Trump, joins a small group of prominent Wall Street investors and analysts
who guessed right on Mr. Trumps win despite overwhelming predictions that Hillary Clinton, the Democratic
nominee, would emerge victorious. Some of those who anticipated a Trump presidency stand to profit from the
markets reaction to his election.
Billionaire Carl Icahn and hedge-fund managers John Paulson of Paulson & Co., Robert Mercer of Renaissance
Technologies LLC and Anthony Scaramucci of SkyBridge Capital LLC all backed Mr. Trump, while sometimes raising
money or donating to the campaign, or advising the candidate, even as much of Wall Street distanced itself from the
Republican nominee.
Ive supported some losing presidential candidates in the past, said Mr. Scaramucci, who backed Scott Walker and
Jeb Bush earlier in the Republican primary campaign. It feels good to back a winner.
Mr. Mercer, the co-chief executive of Renaissance Technologies, and his daughter, Rebekah, played a key role in
the August shake-up of Donald Trumps presidential campaign , recommending Breitbart Chairman Stephen Bannon
and Republican pollster Kellyanne Conway for top posts, after meeting with Mr. Trump at an East Hampton, N.Y.,
fundraiser.
Within Renaissance, a firm that relies on closely held computer models and algorithms, Mr. Mercers support was at
odds with the public stance taken by Renaissance founder Jim Simons, who gave millions to a Hillary Clinton super
PAC.

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Donald Trump and John Paulson attended a luncheon for the Economic Club of New York on Sept. 15. Mr. Paulson
is among the hedge-fund managers who backed Mr. Trump.
Some of these supporters already may be benefiting from the surprise election result. Six of Paulson & Co.s 10
largest holdings as of June 30 were pharmaceutical companies, the most recent securities filings show, including
Shire PLC, Mylan NV, Allergan PLC, Teva Pharmaceutical Industries Ltd. and Valeant Pharmaceuticals International
Inc.
On Wednesday, Shire rose 11.5%, Mylan gained 4.9%, Allergan was up 8.7%, Teva was up 3.1% and Valeant rallied
7.4%. The gains reflect relief at the defeat of Mrs. Clinton, who has been critical of drug pricing, and whose expected
victory was partly responsible for the sectors poor performance throughout 2016.
Mr. Icahn said Tuesday night from a viewing party at Trump Tower that he believes Mr. Trumps election will benefit
the markets over the long haul, though he continues to bet U.S. stocks are overheated and will fall.
You have no productivity in this country, Mr. Icahn said. I just think that we need change very, very badly.
Mr. Icahn told television networks Wednesday that when he left the party he went home and bought more shares.
The octogenarian has been bearish on the stock market for the past year with heavy short bets. But he also controls
companies such as an oil refiner, CVR Energy Inc., and a railcar maker, American Railcar Industries Inc., both of
which jumped on Wednesday.
Jason Trennert, chairman and chief executive of investment-research firm Strategas Research Partners LLC, also
predicted a Trump victory.
His clients largely disagreed with him. As recently as two weeks ago, he says they were more likely to ask about the
chance of a Democratic sweep of Congress than about a Trump victory. At a minimum, two-thirds or higher thought
it was Secretary Clintons race to lose, Mr. Trennert said.
Mr. Trennert, who is a Republican with a picture of Ronald Reagan on his desk, wouldn't say whom he voted for. But
the praise for his correct call was mostly from Trump supporters. The congratulations mainly came from people
who were happy with the outcome, he said.

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In a July webcast with clients, Mr. Gundlach said that if Mr. Trump won, he likely would increase the nations debt in
an effort to fuel economic growth, citing promises to build a wall on the Mexican border and spend on infrastructure.
When he made the prediction, investors were buying up Treasury securities. Around that time, 10-year notes yielded
just over 1.3%. Mr. Gundlach and his firm adopted a much more cautious stance, worried that Mr. Trumps spending
program would boost the deficit and hurt government bonds.
The Trump aspect was a secondary factor that added to his already bearish view on Treasurys, he says.
That move has paid off. Now, Mr. Gundlach says bonds might rally in the near term but likely will continue to sink in
price over the next five years, with the 10-year yield eventually hitting 6%.
More government spending could give the economy a near-term jolt, Mr. Gundlach says, potentially helping stocks.
The Dow Jones Industrial Average rose 1.4% on Wednesday, after slumping in after-hours trading Tuesday when
news of the Trump lead in swing state Florida was first reported.
Mr. Gundlach manages a number of funds, including a private hedge fund, all of which are in the top quartile of their
categories so far this year, he says.
Im having my best year ever, he says.
Write to Gregory Zuckerman at gregory.zuckerman@wsj.com, Ken Brown at ken.brown@wsj.com and David Benoit
at david.benoit@wsj.com

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