Veteran investor Mark Mobius predicts more pain for US markets - and issues a bleak outlook for China and Europe
- Mark Mobius warned of further downside for US markets and the economy.
- The veteran investor singled out Europe's energy crisis and China's lockdowns as key concerns.
Mark Mobius predicted further pain for US markets, and issued a bleak forecast for Europe and China, in a CNBC interview on Tuesday.
The veteran investor and founding partner of Mobius Capital Partners was asked whether he expected stocks to continue falling, Treasury yields to keep rising, and the dollar to strengthen further.
"I still think it's going to get worse," he replied. "The picture looks very bad."
Mobius said he expects the European Central Bank to hike interest rates dramatically to tamp down inflation. The ECB's next monetary policy decision is expected after its policymakers meet Thursday.
The Federal Reserve would have to follow suit, to stop the US dollar strengthening too much, as that would hurt the competitiveness of US exports, he said. If the Fed hikes rates beyond the level needed to curb inflation, economic growth and asset prices could suffer.
Meanwhile, the emerging-markets specialist rang the alarm on one of America's key trade partners.
"China is in real trouble, it's probably going to get worse there," he said.
Mobius highlighted China's ongoing COVID-19 lockdowns and its decaying relationship with the US and other nations. He also noted that Beijing has run up massive debts in funding local property developers and financing other countries' infrastructure development.
Turning to Europe, the influential investor cautioned that the region's energy crisis will worsen during the winter, as soaring fuel prices sap consumer demand and force factories to cut production or close down.
"This is a very bad scenario for Europe," he said. "We think it's going to get worse before it gets better."
Mohamed El-Erian, Allianz's chief economic advisor, issued a similar warning in a separate CNBC interview on Tuesday. He questioned how US markets and the economy would hold up against international headwinds.
"How resilient are we to the mess in China, to the mess in Europe?" he asked.
The economist and former PIMCO boss added that he doesn't believe further rate hikes are baked into US stock valuations.
"I do think there's still downside still ahead," he said. "Nothing compared to what Europe, China, and others face, but I do think there's going to be pressure."