Joachim Fels, Pimco managing director and global economic adviser, on why he thinks investors should be worried.
One of the world’s largest money managers says you should fear the lack of fear in markets.
Investors in global equities are enjoying the best start to a year in at least three decades, cutting back on cash positions and plowing more money into riskier assets. However, just as many expect this bull run to last even longer than previously expected, Pacific Investment Management Co. says now is the time for caution.
“The fact that the fear is gone is the main reason why we should be worried,” Joachim Fels, a global economic adviser at Pimco, told Bloomberg TV on Wednesday from Newport Beach, California. “That means most investors are now pretty fully invested and that means they will want to get out if the markets start to correct — exacerbating the downdraft.”
Chances are that interest rates will rise faster than many expect, pushing up government bond yields, he said. Fels also suggested inflation may tick higher, and continues to advise an overweight position on inflation-linked bonds within fixed-income portfolios. His firm has cut exposure to corporate credit, particularly high-yielding bonds, concerned that a sell-off may soon arrive, with the asset class having a high correlation to stocks.
For now, investors seem immune to such warnings. The MSCI All-Country World Index is up 4.6 percent in 2018, the best start to a year since at least 1988, according to data compiled by Bloomberg.
“We’ve seen a big rally, markets are still going higher, but this is now a time for caution,” said Fels.
— With assistance by Scarlet Fu, and Julia Chatterley
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What the Experts Say…
“A week U.S dollar is a threat to the global economy and the only way to stop the greenback’s decline is to reintroduce a gold standard.” – Steve Forbes: Editor of Forbes, and American business magazine which features news articles on finance, industry, investing, and marketing topics. It is also known as “Home Page for the World’s Business Leaders”
“We’ve had a economic problems in teh U.S or in the North America every four to eight years since the beginning of the republic so to say that we’re gping to have a problem is not unusual, I would expect it to start this year or the next… and it’s going to be the worse in your lifetime and my lifetime” – Jim Rogers, Chairman of Roegrs Holdings and Beeland Interests.
Peter Schiff, CEO of Euro Pacific Capital and long-time proponent of gold, is not buying the dollar hype. Speaking to Aaron Task on Yahoo Finance’s Market Pulse, Schiff projected that the U.S dollar is going to collapse, and “people are going to turn to gold, in a big way, all around the world.” – Peter Schiff, CEO of Euro Pacific Capital Inc.
“Physical gold is an insurance rather than a speculative asset. I regard precious metals as insurance against political interference with living standards. I believe certainly not the only determinant, but the most important determinant!” – Rick Rule, CEO of Sprott US Holdings Inc.
“Gold is money and nothing else. The control of credit isn’t control of money. The basis of banking is not always credit. The credit is evidence of banking, but it is not the money itself. Money is gold, and nothing else.” – J.P. Morgan, Corporate financier and banker on Wall Street throughout the Gilded Age.
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