Emerging Markets Are Coming Unhinged
Stock market participants should look for opportunities in emerging markets, which have become unhinged.
“Look at sectors that have been completely unhinged. Emerging markets have been completely unhinged, they’re broken in terms of markets,” Mohamed El-Erian said in a TV interview Thursday.
He noted that all emerging market economies were slowing, and that weakness in those economies could lead to slower US economic growth but not recession.
Mr. El-Erian also said there was a “high” probability that the European Central Bank would expand its stimulus program.
“I suspect if we talk in January, we will find that the ECB has pressed even harder on the stimulus petal, while the Fed has taken its foot a little bit off the accelerator,” he said.
ECB President Mario Draghi said on 23 September hat the central bank needed more time before deciding on further stimulus. He did say, however, that the ECB was ready to beef up its EUR 1-T+ asset buying program (QE) if needed.
The Fed kept interest rates unchanged on 17 September on worries about the global economy, financial market volatility and sluggish inflation in the US, but left open the possibility of a modest policy tightening later on this year.
Mr. El-Erian also said activist investor Carl Icahn is right with regard to his recent view on market risks. Mr. Icahn is very critical of the Fed, warning about the unintended consequences of Zero+ interest rates on the economy and financial markets.
“He’s right … the balance of risk is starting to tilt because policymakers are not responding,” Mr. El-Erian said.
Have a terrific weekend.
HeffX-LTN
Paul Ebeling
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