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El-Erian: 'Pockets of Value' in Market Rubble for Tolerant Investors


By    |   Monday, 23 March 2020 02:51 PM

Economist Mohamed El-Erian now sees opportunities for investors who can stomach risk amid the seemingly endless stock market plunge amid the coronavirus crisis.

“Those people who entered this defensively and have a massive appetite for volatility, there is starting to be real pockets of value,” El-Erian told CNBC.  

“For most investors, I think you still want to be cautious out there,” the Allianz chief economic adviser said.

El-Erian, former CEO of investment giant Pimco, said the companies risk-tolerant investors should be looking at are those whose businesses will actually benefit in the “post-crisis world.”

As long as those companies have strong balance sheets, the economic shock from the coronavirus should not be crippling. In fact, those companies will “come back really strong,” the Bloomberg opinion columnist and Newsmax Finance insider said.

“That’s why I’m saying there is areas of long-term value, even now, before we turn around. But you have to have a tremendous ability to withstand volatility,” he said.

However, Wall Street slipped on Monday as the still rapidly spreading coronavirus forced more U.S. states into lockdown, eclipsing optimism from an unprecedented round of policy easing by the Federal Reserve.

After cutting interest rates to near zero and offering to purchase more Treasury bonds and mortgage-backed securities last week, the central bank now decided to lend against student loans and credit card loans as well as buy bonds of larger employers, Reuters said.

The unprecedented moves briefly lifted the U.S. stock index futures more than 3%, but the mounting death toll from COVID-19 and growing evidence of the economic damage to Corporate America quickly sent the main indexes back into the red.

"They are throwing everything in the kitchen sink," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"(But) these efforts alone are not going to do anything against the virus - that's the big problem. It will help but we still need fiscal stimulus and we need a lot of it. We need it geared towards the people who are going to be really suffering."

Investors had hoped the U.S. Senate would clear a $1 trillion-plus coronavirus stimulus package over the weekend, but Democrats and Republicans were still scrambling to come to an agreement.

Ohio, Louisiana and Delaware have now joined New York and California in asking people to stay home, foreshadowing a near halt in economic activity and more pain for U.S. equities, which have already lost more than $9 trillion in value in the biggest selloff since the financial crisis.

Goldman Sachs expects an outright contraction in global real GDP in 2020 on the back of a 24% plunge in U.S. real GDP in the second quarter: two-and-a-half times as large as the previous post-war record.

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Economist Mohamed El-Erian now sees opportunities for investors who can stomach risk amid the seemingly endless stock market plunge amid the coronavirus crisis.
el-erian, value, market, investors
Monday, 23 March 2020 02:51 PM
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