Former Reagan economic adviser David Stockman warns that the stock market is doomed regardless who wins the White House.
He says the savvy stock investor will sell everything before the politics hit the fan.
"The markets are hideously inflated," Stockman recently warned CNBC. The former Director of the Office of Management and Budget under President Ronald Reagan urged investors to dump stocks and bonds ahead of the dangers that both Donald Trump and Hillary Clinton pose to markets if either is elected as President.
"If you don't sell before the election, certainly do it afterwards. Government is going to be totally paralyzed regardless of who wins," he said. "There could be a 25 percent draw down on markets," he predicted.
"For six months, or even longer, there will acrimony, there will be brinkmanship. There will be paralysis. There will be a swarm of house committees doing investigations from all of these WikiLeaks!" Stockman said if Hillary wins.
"Therefore, there will be no baton handed off from the Fed to fiscal policy as we slide into recession," he added.
Stockman, who spent 20 years on Wall Street with Salomon Brothers and Blackstone and served as a Congressman for Michigan, said the IRS is the government agency that is the clearest indicator that a storm is brewing over financial markets.
"The IRS said that last year revenue was up 1 percent and, in the last quarter, it was down 4 percent," explained Stockman. "And, in the five months since May, payroll withholding was barely keeping even with wage inflations. That means the work hours aren't happening," he said.
"We're in the same place today as we were in December of 2014," explained Stockman. "There's massive risk. So what's the possible reward?"
Stockman likes that Trump is "against the establishment, but he has no economic program. Yes, he's a disruptor, but has nothing to disrupt with," Stockman said.
"If elected, it will be partisan warfare and a total disaster," Stockman explained to CNBC. "Under a Trump victory, all bets are off."
Stockman said he has washed his hands of everything in his portfolio except cash and gold.
Stockman isn't alone in his dire predictions of market chaos after the election. But other financial gurus think Trump winning the White House would cause a stock-market collapse.
Billionaire investor Mark Cuban says he has his "Trump hedge on." In a recent interview on Fox Business Network anchor Neil Cavuto's show "Coast to Coast," the "Sharktank" reality TV personality warned: "In the event Donald wins, I have no doubt in my mind the market tanks."
But not all gurus are as pessimistic as Cuban and Stockman.
Wells Capital Management's Jim Paulsen predicts that the stock market will literally end the year with a bang as it charges into 2017. "I think we're going to maybe find out we are finally turning northward on earnings momentum," Paulsen, Wells’ chief investment strategist, told CNBC.
(Newsmax wire services contributed to this report).
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