Mohamed El-Erian warns that stocks could tank if the Fed's liquidity 'engine' stops running, cites disconnect between prices and fundamentals | Markets Insider

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Mohamed El-Erian warns that stocks could tank if the Fed's liquidity 'engine' stops running, cites disconnect between prices and fundamentals

Economist Mohamed El-Erian says markets may falter as the Fed's liquidity"engine" becomes less and less powerful, and as investors begin to challenge elevated valuations.

In a separate op-ed for Bloomberg, El-Erian said economic and corporate fundamentals must improve for valuations to be sustained.Renowned economist Mohamed El-Erian says the stock market faces downside risk as the Fed's liquidity"engine" becomes less and less powerful. He also sees the possibility of a dip if more investors start to question whether sky-high valuations can be validated by fundamentals.

"The Fed's repeated support for financial markets has engendered a deep 'buy-the-dip' investor conditioning and a prominent FOMO mindset," he wrote.Now that the Fed isn't meeting for the next two months, El-Erian expects"more skeptical investors may now feel more comfortable to challenge valuations."

 

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Naive question here: doesn't the liquidity 'engine' encourage debt? And how is this a good thing? I'd really like to understand the reasoning behind this.

Everything trump touches dies ... you can pretty much count on this happening.

Really!?

He has been wrong for the last 7 months... so why should anyone believe him?

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