LONDON (Reuters) - Election wins for left-wing politicians such as Britain’s Jeremy Corbyn and Elizabeth Warren in the United States may be a key risk for 2020 that bond markets are underestimating, the head of M&G Investments’ wholesale fixed income team said on Monday.

Speaking at the Reuters Global Investment Outlook Summit, Jim Leaviss, who authors the widely read Bond Vigilante blog, said an outcome would have implications for markets if it led to a surge in spending and borrowing.

Warren, a U.S. senator from Massachusetts, has emerged as a front-runner along with former Vice President Joe Biden in the race for the Democratic nomination to face Republican President Donald Trump in the November 2020 election.

Her plans include a $20.5 trillion plan to provide healthcare for all Americans.

“I think my biggest thing – the thing I’d think about as a bond investor next year - is really the revenge of the left,” Leaviss told the summit at Reuters’ London office.

He said Trump did not have very much ammunition left in terms of fiscal spending ahead of the election given that his Republican Party no longer controls both houses.

“But have we priced in what an Elizabeth Warren victory, or a Bernie Sanders victory, or a Jeremy Corbyn victory would mean for asset prices?” he said.

Britain goes to the polls on Dec. 12. In its case, Leaviss said a ramping up in spending was likely to occur whether the ruling Conservative Party or opposition Labour Party led by Corbyn takes power.

A think-tank warned on Monday that Britain’s state spending will head back to levels not seen since the 1970s if the two main political parties make good on their promises.

Higher government spending, leading to increased borrowing, is a risk for major bond markets, where yields slid to record or multi-years lows this year in the face of weak economic growth and central bank easing.

But U.S. and European borrowing costs have shot higher in the past month, reflecting increased confidence that a no-deal Brexit would be avoided while U.S.-China trade tensions eased.

Yet factors such as demographics and tech improvements mean inflation will stay subdued for now, Leaviss said, adding:

“I would want to see a more significant rise in bond yields before getting more bearish on the asset class.”

But while politics may dominate market trends next year, climate change and associated policy shifts by governments will be the bigger longer-term issue, he reckons.

This is already playing out, Leaviss said, noting the British government’s decision to impose a moratorium on fracking, which has hit shares in UK shale gas explorers.

Such a decision in the United States at some point would have an even bigger impact.

“A lot of the U.S. high yield market is shale-related. I’d be nervous about lending money to those kind of firms,” he said.

A broader risk stemming from climate-driven investment shifts would involve “stranded” assets - sectors made redundant by advances in technology and the securities issued to fund them.

“It’s already cheaper to install wind power than it is to install fossil fuel power in most cases...Certainly the running costs are cheaper. So we’re reaching a tipping point where stranded assets will become a significant thing for risk assets,” he said.

Leaviss also said that for next year he expected:

- Central bank QE to have a diminishing impact on bond markets

- Emerging markets have the best value in the bond world

- ECB under Lagarde won’t be much different than under Draghi

- Not much value in credit, given the tight spreads

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