Mohamed El-Erian is a Bloomberg View Columnist. He is also the chief economic advisor at Allianz SE. He is chairman of President Barack Obama's Global Development Council, a Financial times contributing editor, and the former chief executive officer and co-chief investment officer of Pimco. He holds a masters degree and doctorate in economics from Oxford University.
He is and has been giving our (High Rock) market sentiment a great deal of credibility, because he is echoing a great deal of what I write about and discuss in regards to the global economy and financial markets.
I would highly recommend a read of his view from Feb 22:
In a nutshell:
1) Corporate earnings will continue to be challenged by spreading global economic weakness.
2) The ability of central banks to repress volatility is increasingly in doubt.
Market participants have used cheap money to finance asset purchases, but those assets are no longer providing positive returns because their prices have become inflated. We have been on this story since last May, telling anyone who would listen that this was not going to end well. We continue to invest from a defensive posture (believing that prudent investing for ourselves and our clients demands an over-weight position of cash and an under-weight position of equities).
Dr. El-Erian also suggests, as we have also been saying on our weekly webinars, that:
3) Recent market stability has been traders covering their short positions but has not triggered long-term capital to return to the market:
"It would appear from data about the flow of funds that markets still need to re-price considerably lower to find the anchoring inflow of significant patient capital."
High Rock has been and will continue to have "patient capital".
And further, and in line with the style in which we run our business and our client portfolios:
"This does not mean that investors should just reconcile themselves to passively riding roller-coaster markets that will likely create anxiety and may even force some to liquidate at the wrong time. Instead, investors would be well advised to consider adding a tactical component to their longer-term strategic and structural positioning."
At High Rock we have 3 models (in our private client division): Fixed Income, Global Equity and Tactical Equity.
If your advisor is telling you to "sit tight", it is not good advice, and it may in fact be because they don't have the discretionary authority to adjust your portfolio and it would be too daunting for them to do so for every client individually.
High Rock Capital Management has discretionary authority to make simultaneous adjustments to client portfolios so that it is quick, easy and fair for all clients.
Also, they may not have the time or the skill-set to do advanced market or individual company research as we do at High Rock. Most advisors are paid to "gather" assets, not manage money.
So thank you Dr. El-Erian for your supportive comments!
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist