Whoops! Top economist admits misfire in tech stocks — but he’s still not convinced the price is right
By Thu, Jul 30, 2020
Earlier this month, Mohamed El-Erian sounded the alarm on top-heavy stocks that are “stunningly decoupled from underlying corporate and economic fundamentals.”
Now, the Allianz chief economic adviser is admitting to his mistake, though he’s clearly not ready to jump back into the high-flyers that scared him away a few weeks ago.
“ ‘I have been wrong for the last three and a bit weeks — I exited those names… in my tactical exposure. That was the wrong thing to do. It’s the overall valuation that’s the real question mark.’ ”
That’s El-Erian offering up his current take on the stock market on Thursday in an interview on Yahoo Finance, just before tech giants Amazon AMZN, +0.60% and Facebook FB, +0.51% rallied hard in after-hours trading following their upbeat earnings reports.
While El-Erian’s not a fan on price, he’s still a believer in a rosy future for the high-flyers. “I can see them continuing to outperform because they have both the resiliency and agility to manage this economy,” he said. “I just don’t know wether the valuation still make sense to tell you the truth.”
Overall, as the country continues to grapple with the pandemic, he looked at what’s next for the economy with a sober eye in the wake of the worst-ever drop for GDP in the second quarter.
“Now we’re getting the leveling off,” he explained in the interview. “That is a worry because not only do we have to deal with the damage that has been created to the economy, but also unfortunately we have now become much more sensitive to any policy slippage.”
Watch the full interview:
The stock market had a mixed session on Thursday, with the Dow Jones Industrial Average DJIA, -0.85% closing down 226 points. The S&P 500 SPX, -0.37% also ended lower while the Nasdaq Composite COMP, +0.42% managed to finish in the green.
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