Photo: Yahoo Finance
PIMCO’s Mohamed El-Erian has been of the belief that central banks have been distorting asset prices.Specifically, asset prices have disconnected from their fundamentals.
But he doesn’t believe this discrepancy can hold for much longer.
“There are those that believe that high asset prices will pull up the fundamentals, and then everything will go higher,” he said in an interview with Daily Ticker’s Lauren Lyster. “And then there are those that say ‘Wait a minute. I’ve seen this move before. What ends up happening is asset prices come down to the fundamentals, so I’m going to take some risk off the table. And I’m going to do it gradually. Because central banks are not gonna exit any time soon.'”
“We would be in the second camp,” said El-Erian.
“We think that prices are artificially high, that maintaining them here is going to be hard as central banks become less effective, and that it’s time to book some profits. It’s time to wait for better entry points.”
But this doesn’t mean that he thinks prices will collapse any time soon.
“This is not a 2008 situation,” he continued. “This is not a Lehman moment. But this is rather that price have gotten way ahead of what policy can deliver.”
Watch the whole interview at Yahoo Finance.