Page 42 - Investment Advisor July/August 2022

Conclusions

PORTFOLIO PERSPECTIVES
By Dinah Wisenberg Brin

El-Erian: 10 Insights for Advisors When

There’s ‘No Safe Haven’

The economist offers tips, and a few predictions, to navigate inflation and
falling stocks.

restored more traditional correlations
because “we have priced in what the Fed
is likely to do.”

2. A long-term bear market
looks unlikely.
“We’ve mostly priced in interest rate
risks. We’ve gone most of the way in
the pricing in tighter financial condi-
tions, [but] we’re still in an early stage,
unfortunately, in pricing in the growth
risks,” he said.
A market disruption, when investors
want to do something but can’t, could
cause a bear market, but “I don’t think
it’s a high probability,” El-Erian said.
inancial markets are going through money on both risky and “risk-free” “Do we end up having a market func-
a transition in which there are no assets. Here are 10 points he made: tioning problem? The probability is well
Fentirely safe haven investments, below 50% but that is what would turn
Mohamed El-Erian, chief economic advi- 1. It’s just a phase. this bear market into something much
sor of Allianz Group, said in late May. Markets may be volatile but they’re in longer and something more painful.”
“The markets have been distorted for transition, El-Erian said. “I completely,
so long that there is no safe haven — completely understand how unsettling 3. Consider different
that’s our reality right now. So you try this all is and it’s just a phase that we economic indicators.
to manage risk mitigation without a are going to have to go through,” he El-Erian suggested market watchers
safe asset, and that’s really unusual,” said. “I keep on telling myself we are consider different economic indicators
he said during a Q&A webcast in which restoring value — it’s better than saying in assessing what’s happening in this
he offered insights and tips to financial we’re losing money — we are restoring unpredictable environment. “We are in
advisors. The process “started a while value, and for long-term investors that’s a very, very fluid world. A lot of the
ago but it didn’t matter because the a good thing to have, value,” El-Erian parameters that we took for granted are
prices were moving in the right direc- said. “The value that’s being restored is now variables,” he said.
tion,” he said, adding that in the first going to be significant.” “Who would have thought that we
four months of this year investors lost The good news: in [May] the market would look at job vacancies as an impor-

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