MARKETS

Don’t Buy the Dip Amid Russia War, Says El-Erian

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  • Mohamed El-Erian cautioned investors against rushing back into the stock market while Russia continues to wage war on Ukraine.
  • Instead, they should reshuffle their portfolios during rebounds and be more discriminating about purchases, he wrote in a Bloomberg column.
  • Investors should “focus more on selecting individual stocks while positioning for a future of greater dispersion in global economic performance,” he said.

Top economist Mohamed El-Erian cautioned investors against rushing back into the stock market while Russia continues to wage war on Ukraine.

Instead, they should reshuffle their portfolios during rebounds and be more discriminating about any purchases, he wrote in a Wednesday column on Bloomberg.

“Unless investors can identify the so-far elusive Putin offramp, their heavily exposed equity positions would be better served by rationalizing them during the bounces rather than buying the current dip outright and hoping for the immediate initiation of a long rally,” El-Erian said.

He warned that the Russia-Ukraine war’s impacts will intensify as it drags on, bringing greater uncertainty to the market and wavering


liquidity

in stock.

For investors who typically buy the dip, El-Erian noted that success is much less certain in the current landscape. A broader bounceback in the market won’t be a given unless war eases, and even then the market could face disruption.

Given the current landscape, investors should “use this opportunity to focus more on selecting individual stocks while positioning for a future of greater dispersion in global economic performance,” El-Erian wrote.

His warning comes as more data indicate investors are snapping up discounts in the stock market. Bank of America said Tuesday that retail traders have continued dip-buying throughout the war in Ukraine, which the bank’s analysts said bodes well for the broader market.

And on Wednesday, Vanda Research said retail investors have bought about $7.1 billion worth of stocks in US markets over the past five days.

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