Mohamed El-Erian, chief economic adviser at Allianz, spoke with Melissa Lee about assets he would own and about the impact of politics on financial markets.
He said that he would be in cash right now, but if he had to choose between stocks and bonds, he would rather own bonds. He thinks that stocks aren't pricing in the amount of macro uncertainty the world is currently facing.
El-Erian explained that there are number of political events that are coming up. There is going to be more clarity on Brexit, the Italian referendum and the U.S. election is close and these events will have some impact on the markets, which is hard to price.
In addition, it's hard to figure out what central banks are doing. The Bank of Japan is losing effectiveness, the Fed is divided and ECB is going to be pushed to do more. He thinks that bonds will get anchored in a world like this, but there are going to be questions about stock valuations.
El-Erian would rather own the technology sector than the energy sector. He explained that he loves the sector that generates cash, has a business model that works and doesn't depend on supply side that he doesn't quite understand.
When it comes to the U.S. election, he thinks that Clinton would be a better choice than Trump because she has a more complete economic plan and a lot more experience. There is also a big risk what would happen to the trading system if Trump wins.
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