The recent stock market crash is not an isolated incident and could be a harbinger of further economic distress, warns billionaire investor Mark Mobius.
What Happened: Mobius, CEO of Mobius Capital Partners, believes that Monday’s global stock rout, which saw the S&P 500 record its worst single-day loss in two years, was triggered by more than just weak U.S. economic data and the Bank of Japan’s interest rate hike. He suggested that deeper economic and political issues were at play.
While some analysts view the sell-off as a healthy correction for U.S. equities, Mobius attributes it to rising global geopolitical tensions and the upcoming U.S. presidential election, according to a report in The Insider. He also pointed to the situation in Japan, which sparked a domino effect, leading to a downturn in the U.S. market.
“It was not technical in nature. All of these put together create a great deal of uncertainty. And then the situation in Japan set off a chain reaction, and, of course, the U.S. market came down,” he said.
Mobius anticipates more stock market drops in the future, with the carry trade unwind, identified as a factor in this week’s sell-off, likely to continue.
“We are now feeling the effects of this reduction. If you look at the money supply growth in America, it is very low now,” he added. “That means not much money is going to go into the market or business or in the economy. So, this is a real problem and a longer-term problem going forward. We have more problems in the US and, that will affect the global situation unless the money supply is increased much more than it is now.”
He also expressed concern over the slowing U.S. job market and the Federal Reserve’s significant reduction in the money supply in its bid to curb inflation, both of which could lead to “more problems going forward.”
“I think it is a good idea to have maybe 20% of your portfolio in cash, maybe a little more, because there will be opportunities down the road and it is a good idea to have some dry powder, let us put it that way,” Mobius said.
Why It Matters: Given the current economic climate, Mobius advises investors to keep a larger portion of their portfolio in cash, suggesting around 20%, to take advantage of potential future opportunities.
This advice comes in light of his anticipation of more economic woes, which could present investment opportunities during market downturns.
Read Next:
Mark Mobius Says Richest Untapped Opportunity Of Investing Lies In India
This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
