Richard Brian/Reuters
The recent sell-off in stocks could be a warning sign for what’s coming for the economy, Mark Mobius said.
The billionaire investor flagged the risk of recession in an interview with The Economic Times.
Mobius said it was a good time for investors to hold around 20% of their portfolio in cash.
The stock market’s steep sell-off this week wasn’t a freak event, and the recent pullback could be a signal that there is more trouble ahead for the economy, according to billionaire investor Mark Mobius.
The Mobius Capital Partners CEO pointed to the rout in global stocks on Monday, with the S&P 500 notching its worst single-day loss in two years after economic data in the US came in surprisingly weak and the Bank of Japan hiked interest rates, fueling selling pressure among investors.
Some commentators have argued that the sell-off was a healthy pullback in US equities, given how high valuations have climbd. Yet, it’s more likely that the rout was caused by deeper issues in the economy and the political climate, Mobius told The Economic Times in an interview on Thursday.
“It was not technical in nature,” Mobius said of Monday’s sell-off, pointing to rising geopolitical tensions around the world, as well as the upcoming US presidential election. “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 US market came down.”
Stocks could have more downside on the way, Mobius suggested. The carry trade unwind — which emerged as a culprit of the sell-off this week —likely has more room to run, he predicted,echoing other Wall Street strategists.
Meanwhile, the economy looks like it could have “more problems going forward.” Recession fears spiked this week after the job market slowed more than expected in July.
Warnings of an economic slowdown also reside in the money supply, which the Fed has reduced “dramatically” as it attempted to bring down inflation over the past few years, Mobius added.
“We are now feeling the effects of this reduction. If you look at the money supply…
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