With Senator Bernie Sanders currently leading Democratic presidential polls in Iowa and New Hampshire  and with caucuses and the primary in those states less than a month away  its time to start paying attention to what a Sanders presidency would mean for the stock market.

Several prominent money managers have warned that a victory by Mr. Sanders or his ideological ally, Senator Elizabeth Warren, would bring a decline of between 25% and 40% in the value of American stocks. That would destroy trillions of dollars in wealth of American households.

The resulting negative effect on everything from tax revenues to employment would affect even families without much saved in the stock market, and, ironically, could make Mr. Sanders agenda of government expansion much harder to achieve.

If Bernie Sanders becomes president, I think stock prices should be 30% to 40% lower than they are now, Stanley Druckenmiller told CNBC last year. Forbes says Druckenmiller has about $4.7 billion accumulated through a lifetime of managing money. Its worth paying attention to his warning.

The biggest risk for 2020 is the presidential election, the New York Times quotes a JPMorgan researcher, Nikolaos Panigirtzoglou, as saying.

Another billionaire hedge fund manager, Paul Tudor Jones, said his firms employees think the value of the large stocks in the Standard and Poors 500 Index would decline by 25% were Senator Warren elected. Her policies would  assuming they were implemented  probably give you something like that, he said, according to CNBC. As an investor, you have to have a view on the election because the outcomes are so extreme.

Another billionaire hedge fund manager, Marc Lasry, made a similar call, telling CNBC about Senator Warren, I think if shes the president, markets down 20%, 30%.

At the end of 2018, United States households and nonprofit organizations held about $15.6 trillion in corporate equities, according to the Federal Reserve. A decline of 40% would be a destruction of wealth of about $6.2 trillion. A decline of 20% would be a destruction of wealth of about $3.1 trillion. The entire annual GDP of California in 2018 was about $3 trillion, and of Japan, about $5 trillion.

Doubtless some Warren and Sanders voters would see that sort of wealth destruction as good news. Since much of the stock market wealth is in the hands of rich people, a big stock market decline would reduce the inequality that so upsets left-wing Democrats.

Mr. Sanders and Mrs. Warren wont even have to wait for Congress to enact their wealth tax; they can make trillions of dollars disappear by means of intimidation, not legislation.

The last time the stock market took that big a tumble was in 2008. Businesses and state and local governments laid off workers, tax receipts tumbled, the real estate market tanked, unemployment rose. Instead of focusing on the problem that other people were too rich (inequality), people were worried about finding a job or about having their house foreclosed on.

In a roaring economy, its easier to find money for spending on health care and education of the sort Mr. Sanders and Mrs. Warren advocate. In a sagging economy, government spending goes up automatically on items such as food stamps and unemployment benefits, while income-tax revenues decline.

In such an environment, vast government expansion becomes less tenable. President Obama managed it with the stimulus and ObamaCare during the post-2008 downturn, but he paid a significant political price, losing the House of Representatives. Likewise, President Franklin Roosevelt responded to a stock market crash with a vast expansion of government.

A President Sanders, or Warren, would probably try a similar move, arguing that the same government programs they had proposed during the booming Trump economy would be more essential than ever as a way of cushioning the blow in a bad economy created by the expectation of their policies.

The policy prescription  more big government  would be the same. Its just the rationale that would shift, depending on whether the economy is soaring or sagging. So theres probably some basis to the idea that a Sanders or Warren administration would be bad for the market.

Democrats might claim that stocks do better in Democratic administrations. And its certainly possible that the market is driven mainly by forces other than presidents, who are constrained by Congress and who only stick around for four or eight years. One doesnt have to be a Wall Street genius to understand that the Sanders-Warren agenda  higher taxes, increased regulation, more government control  means the share in future profits represented by a share of stock would be worth less.