Not only will Donald Trump win the November election, but his victory will propel U.S. economic growth higher, according to Jeffrey Gundlach. Trump will fuel a debt-driven increase in government spending, which Gundlach said will push GDP growth to levels reminiscent of the Ronald Reagan era.

Gundlach did not endorse Trump or say whether he would vote for him.

Gundlach spoke to investors on June 14 to provide updates on the DoubleLine Total Return Fund (DBLTX). He is the founder and chief investment officer of Los Angeles-based DoubleLine Capital, known for its fixed-income mutual funds, closed-end funds and ETFs. Copies of his slides are available to download here.

Trump will move ahead in the polls, Gundlach predicted, despite criticism from the media for his protectionist trade policies. That narrative will put pressure on “risk assets,” Gundlach said, but as Trump’s inauguration approaches, the market will rally “for reasons people won’t understand.”

“Donald Trump will be an economic success,” Gundlach said. He will increase borrowing and if the economy “goes south,” Gundlach said, Trump could even follow through on his statement that he would make a deal with our creditors. Rates could rise and drive down prices on government bonds, according to Gundlach, but Trump could initiate QE4 to buy back those bonds at 70 cents on the dollar, a move that would be tantamount to cutting a deal with our creditors.

Gundlach referred to the presumptive Republican nominee as “Ronald Trump,” a name coined by the media to reflect the similarities to Ronald Reagan’s economic policies – increased government borrowing that led to high GDP growth.

Trump will push federal debt levels higher, Gundlach said. “However imprudent that might be from a long-term point-of-view, when you create jobs, build bridges and build walls, it will have the illusion of economic growth.”

A Trump presidency would create a “huge bump” in GDP, he said. If, hypothetically, government borrowing were to increase by $1 trillion, GDP would grow by an additional 5%, Gundlach said.

Let’s look at Gundlach’s comments on other topics, which ranged from the pervasive effects of negative interest rates to the potential for a U.S. recession.

Global negative rates

“We are in a world of accelerating volume of negative interest rates,” Gundlach said. As of March 31, 23% of global GDP was governed by negative interest rates, and that number is higher now. But those polices have failed to move markets or economic growth higher, according to Gundlach.

Global markets are down substantially from recent highs. Gundlach said that the Shanghai index is off 46% from its high in 2007 and from a year ago, German markets are down 20%, France is down 20% and the U.K. is down 15-17%. The U.S. is down 2% this year and has been the strongest performer of major markets; performance in most other markets meets the technical definition of a bear market – down 20%.

“Negative interest rates are not leading to economic growth,” Gundlach said. Every year since 2011, growth and earnings forecasts by analysts have been downgraded from when the forecasts were initially made until the final data was reported. The forecast G7 and global GDP is lower for 2016 than 2015, and could end up being “significantly” lower he said. That forecast includes 7% growth for China. But, according to Gundlach, China comprises 16% of global GDP, and if it grows at 0%, global GDP growth would decrease by an additional 1%.

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Jeff Gundlach – Donald Trump Will Be an Economic Success