By Laura Sánchez
- Market volatility and the next moves by central banks must be watched “very carefully,” warned veteran investor Mark Mobius.
- He described the “crazy moves” in assets as being driven by “disorientation and confusion.”
Investing.com – Market volatility and upcoming central bank moves should be watched “very carefully,” warned veteran investor Mark Mobius, describing the “crazy moves” in assets as being driven by “disorientation and confusion”.
Market speculation about when central banks, and in particular the US Federal Reserve, could start to reduce asset purchases has been widespread for months given the nascent recovery from the coronavirus pandemic and the specter of a rising inflation.
Mark Mobius, Founding Partner of Mobius Capital Partners, told CNBC that central bank movements should be closely watched.
“Any pullback in the money supply as a result of the central bank pullback will be, I think, very bad for the markets. So I think we have to look at this very carefully, “says Mobius.
“We are in a very uncertain moment, that’s for sure,” he adds.
Mobius believes that risk-taking behavior among investors and market volatility is due to confusion. “A lot of people have cash that they want to do something with, and secondly, a lot of people are confused. The fact that they have seen Bitcoin, which they had so much faith in, fall the way it has, confuses people, “he said.
“So you have an investor situation with a lot of money in your pocket and a lot of confusion and disorientation, so I think that’s what drives a lot of these crazy moves in the market.”
However, Mobius believes that markets could rise even higher if central banks do not eliminate asset purchase programs too soon.
“There is no reason why the market cannot go up unless there is a big pullback in the money supply and that is why we have to watch the behavior of central banks around the world, particularly the Fed.”
Mobius explains how some emerging markets have performed well thanks to the increase in the global money supply and points out how some currencies, such as the Chinese renminbi and the Brazilian real, have performed particularly well over the last year, but warns that the future is also unpredictable for the forex market.
“We are going to see a lot of these unusual moves,” he said, and “some of them are justifiable, but a lot of them are not, and they are not logical either,” which creates a very uncertain prospect.
The next indicator for global markets comes tomorrow Thursday with the latest CPI reading in the US, which could lead the Federal Reserve to reduce asset purchases sooner rather than later. CNBC.
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