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Mobius: U.S. Market at Risk of 20 Percent Drop

Tuesday, 12 Jan 2010 02:41 PM

Although the stock market is on a rebound, investors should remain cautious, Mark Mobius, executive chairman at Templeton Asset Management, told CNBC.

The market will likely correct itself soon with a steep adjustment, noting that a 20 percent correction would be par for the course, he said.

“In a secular bull market, where we are now, you will see corrections can be as much as 15-20 percent, but we shouldn't be concerned that this represents a bear market," he said.

"A 20 percent correction is not unusual, we've seen it in China already last year … so you will see that on an individual market basis,” Mobius said.

Since the markets have recovered, investors won’t see the large gains that occurred in 2009, he said.

However, the market will stay it course and the impetus will continue.

“I'm telling my clients, don't expect the 50 percent or 60 percent that we saw last year,” Mobius said.

The U.S. is likely to maintain its current monetary policy because of a large number of people remain without jobs, Mobius said.

“I don't see tightening until the end of this year and maybe the beginning of next year and there's one very simple reason: unemployment,” he said.

The two largest problems for the economy worldwide are a decreasing money supply and the derivatives market, he said.

“If money supply starts heading down, that would be a bad sign for markets generally," he said.

The market is still reacting to the high unemployment figures, Bloomberg reported.

“People are still losing some jobs here, even in the fourth quarter,” said Jason Cooper, who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Ind.

“The economy, it’s not as good as what people were anticipating. And I think that’s reflected in what the markets are doing.”

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Although the stock market is on a rebound, investors should remain cautious, Mark Mobius, executive chairman at Templeton Asset Management, told CNBC. The market will likely correct itself soon with a steep adjustment, noting that a 20 percent correction would be par for...
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