“I stress, this is different,” the Allianz chief economic advisor and ex-Pimco CEO said in a “Squawk Box” interview, a day after the Dow Jones Industrial Average plunged over 1,000 points or 3.5%, in its worst single-session in more than two years.
Just because buying market dips has worked in the past does not mean it’s going to work this time, he argued.
Disruptions to corporate earnings and economic growth from “shock” events such as the coronavirus tend to stick around longer than more fundamental downturns, said El-Erian.
On Feb. 3, he first warned investors not to buying market drops as they might have in the past. He said at the time that the coronavirus is going to “paralyze China,” adding that it will “cascade throughout the global economy.”
That’s exactly what’s happening.
The spike of coronavirus cases beyond China, specifically in South Korea and Italy, sparked concerns about a prolonged global slowdown due to the outbreak and erased $1.7 trillion in global stock market values Monday.
U.S. stock futures were pointing to about a 100-point higher Tuesday open on Wall Street for the Dow.