Amid the ongoing turbulence in the global stock markets, emerging markets champion Mark Mobius noted that a major correction in the US stock markets is not unforeseen.
“I’m not predicting it tomorrow or next week, but what I’m saying is that the way the structure of the market has now developed with ETFs, when they decide to sell or their computers decide to sell, you’re going to see big corrections,” he told the channel.
Notably, Mobius had in April too warned of a major correction for similar reasons. “You have computers and algorithms working 24/7 and that would basically create a snowball effect. There is no safety valve to prevent further falls, and that fall would escalate very quickly. ETFs represent so much of the market that they would make matters worse once markets start to tumble,” he told in a recent interview with the London-based Financial News. According to the expert, “If the US market falls, then everybody is in trouble.”
More recently, Mobius said that even emerging markets are vulnerable. According to the expert, there’s a danger of contagion from the deteriorating situation in Turkey, and Argentina and Brazil aren’t doing well. “We still could have some downside in the emerging markets. But selectively, you have some good opportunities. Now would be a stock picker’s market,” Mark Mobius said an interview to Bloomberg.
Apart from Mobius, economist Paul Krugman too warned of currency crisis. “It’s become at least possible to envision a classic 1997-8 style self-reinforcing crisis: emerging market currency falls, causing corporate debt to blow up, causing stress on the economy, causing further fall in the currency,” Paul Krugman tweeted earlier this month.