El-Erian Warns Against Buying Any Market Dip

ALLIANZ SE/ADR ALIZY Chief Economic Advisor Mohamed El-Erian wrote a Financial Times op-ed over the weekend and argued investors shouldn't buy any dip stemming from the coronavirus. On Monday, he was a guest on CNBC to further explain his thesis.

Coronavirus Is Different, El-Erian Says

El-Erian said in the interview that the market sentiment is so strong it can overcome a "mounting list of economic uncertainty."

Yet the coronavirus is a whole different story, as it can "paralyze" China and hold back the global economy, he said. In addition, a deadly virus can't be countered by any central bank policy.

Investors should resist any temptation to be buyers of any stock market dip, he said.

Coronavirus A 'Fundamental Shock'

The coronavirus is a unique situation that impacts supply chains and demand for goods, El-Erian said.

In his view, the virus represents a "fundamental shock" to economic growth, especially in China. Or, put differently, the coronavirus is "accelerating sudden stop dynamics."

Perhaps more concerning, the virus outbreak comes at a time when earnings "haven't been good" and European economic data is "weak," he said.

Any financial impact from the virus will first show up in upcoming economic Chinese data, El-Erian said. After that, he said it will be evident in emerging Asian economies and then in Europe.

Finally, El-Erian said it will show up in U.S. economic data but at a "much smaller scale."

Related Links:

Saudi Arabia Reportedly Considering Oil Production Cuts Due To Coronavirus Risk

The Impact Of Coronavirus On China-Centered Supply Chains

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Health CareFuturesMarketsMediaGeneralCNBCCoronavirusFinancial TimesMohamed El ErianSquawk Box
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!