Mohamed El-Erian, says to expect major volatility in the coming months — volatility that will create some great opportunities.
“We have a bumpy road ahead of us, but I keep on stressing, it will create a lot of attractive opportunities,” he told CNBC. El-Erian said the global market may experiencing a shift to a “higher volatility regime,” meaning that asset allocations will become aggressive and price multiples will begin “looking high.” That’s when markets overshoot and act with too much correlation, creating the opportunity is, he says.
He also says that opportunities may well be occurring in emerging markets and oil, but he advises caution. “If you already have exposure, wait a little bit, there are going to be even more attractive positions—there are still people stuck in those markets looking to get out,” he said. “We’re going to look back on this, and this is going to be a very attractive stage. … It’s one of these things that happens once a decade… but be careful because it’s going to be incredibly volatile in the next few months.”
El-Erian also says investors would be wise to stop obsessing so much over potential interest rate hikes. He says the tightening cycle, if and when it occurs, will likely be the “loosest tightening in the history of the Fed”.
Mohamed El-Erian says we are seeing a “classic overshoot” to the downside in emerging markets right now, which should lead to more pain in the near term but opportunity over the longer term.
Investors have been bullish for some time on areas in which central banks have opened the liquidity spigot. But Mohamed El-Erian says it’s time to focus on other opportunities, including tech start-ups and private equity.
Mohamed El-Erian says he expects volatility to increase in the stock market, and says it’s not a time to be buying broad index funds.
Mohamed El-Erian says that while the latest jobs report isn’t perfect, it is “wow”-worthy — and that could actually mean US stocks will lag European equities in the short term.
Mohamed El-Erian says January’s jobs data was “very strong”, and may lead the Federal Reserve to start raising interest rates sooner than previously thought.
PIMCO’s Mohamed El-Erian says the U.S. economy is improving, but still has big issues to deal with. “We continue to heal … but we’re not at escape velocity,” El-Erian tells CNBC. He says that while improvement can be seen in areas like housing, the U.S. hasn’t gotten over “the three big issues”: not enough aggregate demand, too few structural reforms, and too much leverage (which has been shifted from the private sector to the public sector). El-Erian says he thinks Treasury yields may actually fall in the next few months, but he thinks that the long-term environment is one of rising rates. He also says the Federal Reserve’s economic growth projections are too high.