On Wednesday, during an interview on Power Lunch, CNBC, Mark Mobius, of Capital Partners, said he predicts that the US stock markets will be seeing a 30 percent dip, due to the peak in exchange-traded funds.
What Mobius Said
Through his time at Franklin Templeton Investments, Mobius had grown popular from his successful investments in up and coming markets for over three decades. During his interview with CNBC, he said that he’s particularly looking forward to investment opportunities in several booming markets, including China, India and Vietnam.
He also said that he is predicting a 30 percent dip in US stock markets, because of the peak in exchange-traded funds.
“I think this is quite possible. I’m not predicting it tomorrow or next week, but what I’m saying is that the way the structure of the market has now developed with ETFs, when they decide to sell or their computers decide to sell, you’re going to see big corrections, so we have to be ready for the volatility.”
The US Stock Market
ETFs, or exchange-traded funds, have been seeing a rise in popularity as an investment opportunity in the stock market world. According to BlackRock, in the next five years, ETF assets are expected to jump from $4.7 trillion to $12 trillion.
The US bull market, the emergence of which Mobius had predicted back in 2009, is currently doing extremely well. It reached its ninth year on March 9th, making it the second longest one since World War II.
“I can see a 30% drop,” he said, “When consumer confidence is at an all time high, as it is in the US, that is not a good sign. The market looks to me to be waiting for a trigger that will cause it to tumble. You can’t predict what that event might be – perhaps a natural disaster or war with North Korea.”
He explains that because of the rise in ETF popularity, any drop in the bull market will be largely amplified. They reportedly represent such a large percentage of the market that it would make any drop in the stock markets much worse.