Investing legend Mohamed El-Erian says he's avoiding stocks as a demand shock looms for oil
Mohamed El-Erian says he would avoid buying stock indexes at the moment. The former Pimco CEO is eyeing a demand shock stemming from the recent spike in oil prices. Markets may be mispricing the economic consequences from the Iran war, he suggested.
This upcoming likelihood was mentioned by Paul Krugman, but I think ME-E is a little more clear and specific regarding the probability of Demand Destruction becoming the greater problem arising from the current restricted supply. Your average J6P along with dimwit Pols like El Trumpo focuses more on the inflation they see right now, but once DD kicks in you get the spiral of bankruptcies, rising UE & bank failures as loans & mortgages get defaulted on. This doesn't happen immediately, it takes a few months as businesses fall behind on their coupon payments until they are forced to default and make it public. Paul addressses it from the academic side, but M E-E has to deal with this blowback in lotsa real money, so you should pay attention. I'd give it to mid summer before it really begins to bite, a little sooner in Europe, a bit later here. Hard to say how deep the spiral goes down yet, but every day that goes by makes it exponentially more difficult to recover from.
RE