Economist Mohamed El-Erian called on investors to prepare for a period of worrying volatility, noting that the S&P 500 index may fall back to June’s low levels again.
In an interview with CNBC on Friday, September 23, El-Erian said: “I think there is value in some attractive individual stocks, but economic factors cannot be avoided at the moment.”
Allianz’s chief economist warned of an accelerating decline in confidence in US decision-making, stressing that those policies had turned from a shock absorber to an amplifier.
He also indicated that the $50 billion that flowed into the cash markets last week suggests that investors are exiting the stock, bond and other risky assets markets.
El-Erian explained that the imbalance in the US bond market, which suffers from a recent liquidity decline, is a matter of concern, because the treasury bond market cannot be isolated from other markets as a result of its wide impact.
He continued, “The turmoil in this market can create very worrying volatility because the turmoil in Treasuries is structural.”