El-Erian Cautions of Using Brexit Arguments to Discuss US Election

The argument that the U.S. election will have Brexit-like effects and that investors should invest heavily in a major market dip should be approached with caution, economist Mohamed El-Erian told CNBC on Monday.

“I would caution about the Brexit argument. The Brexit argument is go in there immediately because it will bounce back fully. Be careful, this is a little bit different,” El-Erian said. “The U.S. is systemically much more important than Britain is and there’s lots of other uncertainties.”

Instead, El-Erian, chief economic advisor at Allianz, recommends a more cautious approach if there were a sweep for either side, which would counter the widely held prediction of a Hillary Clinton win with Congress remaining in gridlock.

“I would deploy capital slowly. I wouldn’t go all in on Wednesday morning after a big loss if there was a sweep one way or the other,” he told “Squawk Box.”

A sweep, El-Erian continued, could warrant a market overreaction. The market would likely open lower and generate buying opportunities, he said, causing “more popular names” to sell off quickly.

Overall, the key, according to El-Erian, is to have cash on hand and be cautious in responding to market movements.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza