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October 8, 2021

Markets are telling the Fed to start tapering now after big miss on September jobs report, says Mohamed El-Erian

mohamed el-erian pimco — Mohamed El-Erian
REUTERS/Fred Prouser

Markets are sending a clear signal to the Federal Reserve to begin tapering its asset purchases Mohamed El-Erian told Bloomberg TV on Friday.
His comments came just moments after monthly jobs data showed a big miss for jobs added in September.
The weak headline number was alleviated somewhat by higher wages and an upward revision to the July and August numbers.

Markets are sending a clear signal to the Federal Reserve to begin tapering its asset purchases in the wake of a disappointing jobs report, Mohamed El-Erian told Bloomberg TV on Friday.

The Queens’ College President and economist told Bloomberg that Fed Chair Jerome Powell’s previously articulated test for beginning tapering this year had been met.

“The market is also now separating taper from rate increases,” El-Erian said. “So the message from the market to the Fed is: ‘Go ahead and taper, we expect you to.'”

His comments came just moments after the Bureau of Labor Statistics released monthly jobs data showing 194,000 new jobs created in September, a big miss from the consensus expectation of 500,000.

The weak headline number was alleviated somewhat by higher wages in September and an upward revision to the July and August numbers, adding an additional 169,000 jobs for a net total of 371,000. The unemployment rate also fell from 5.2% to 4.8% while the labor force participation rate stayed flat.

El-Erian has been banging the drum for months on the need for the Fed to taper as soon as possible. Last month, he blamed the central bank for bond-market turmoil, saying markets would begin to question the Fed’s judgment on inflation the longer it waited to taper.

Rick Rieder, BlackRock’s CIO of global fixed income, largely sided with El-Erian in a note to clients following the jobs data.

“The Fed probably will (and should) continue its plan to taper excessive liquidity-accommodation in the very near future,” Rieder wrote. “What will be a true test for the Fed into 2022 is whether these supply shocks (including labor) continue well into the year, and how the Fed would deal with inflation continuing.”

Likewise, Charlie Ripley, a strategist at Allianz Investment Management, said on Friday that the bright spots in the jobs data should keep the Fed on course to taper.

“Today’s report shouldn’t sway the Fed from moving forward with tapering the bond program in the coming months as tighter labor conditions and upward wage pressure outweighs the unevenness in the payroll numbers over the past few reports,” Ripley wrote.

Read the original article on Business Insider

September 7, 2021

PIMCO parent Allianz is under investigation by German regulators after its US funds racked up billions of dollars in losses

sad NYSE trader — REUTERS/Brendan McDermid

Insurer Allianz, one of the world’s largest money managers, faces a German probe over huge losses at its US funds, Reuters reported Tuesday.
BaFin is investigating the Structured Alpha Funds, which suffered billions of dollars in losses during the pandemic-led market rout.
Investors have reportedly filed 25 lawsuits and are claiming $6 billion in damages from Allianz.
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German financial regulators are investigating Allianz after the insurance giant’s US investment funds took a painful hit during the pandemic, Reuters reported Tuesday, citing people with direct knowledge of the matter.

Allianz, which manages global assets worth around $2.9 trillion, already faces several other probes and US lawsuits related to the Structured Alpha Funds run by its Allianz Global Investors asset-management subsidiary.

BaFin’s investigators are looking into how much Allianz executives outside the fund division knew about the events there that preceded billions of dollars of losses.

AGI was created a decade ago when Allianz separated it from bond giant PIMCO. Its Structured Alpha Funds cater to US pension funds for workers such as teachers and subway employees, and they were also promoted to European investors.

The funds suffered heavy losses during the coronavirus-led March market rout, with some declining 80% or more. That forced the asset manager to liquidate two hedge funds, Structured Alpha 1000 and Structured Alpha 1000 Plus, both of which ran a derivates-based strategy, and were worth $2.3 billion at the end of 2019.

The regulator’s probe gained momentum after Allianz revealed an investigation by the US Department of Justice on August 1, according to the Reuters report. The insurer’s board said at the time that matters relating to the Structured Alpha Funds could materially impact its future financial results.

Allianz didn’t immediately respond to Insider’s request for comment.

Investors have filed 25 lawsuits against Allianz and are requesting $6 billion in damages, claiming that it deviated from a strategy of providing downside protection during crashes, according to reports.

Read the original article on Business Insider

May 11, 2021

Top economist Mohamed El-Erian warns of a jobless recovery – and recommends investors ride the liquidity wave

Mohamed El-Erian warned the US economy could rebound without a jobs recovery.
The Allianz economist suggested workers might lack the skills employers want.
El-Erian predicted an “everything rally” and advised investors not to cash out.
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Leading economist Mohamed El-Erian raised the prospect of a jobless recovery and advised investors to hold their nerve in a CNBC interview this week.

Pointing to the disappointing US employment data last week, Allianz’s chief economic adviser questioned whether workers have the necessary skills to fill the jobs available. Employers may have embraced new technologies such as AI, robotics, and automation faster than the labor market, he added.

“That’s the biggest fear we have because what we don’t want is a jobless recovery,” El-Erian said. “There’s a massive question mark as to how many will actually be able to get jobs again, or be willing to get jobs again.”

He cited improved unemployment benefits, insufficient childcare, and school closures as other potential drivers of the weak jobs data. If people are earning more by staying home instead of working, and if parents can’t leave their kids at daycare or at school, they might not be filling the jobs available.

El-Erian also recommended investors resist the urge to cash out as inflation fears and signs of market excess mount. “You will get the everything rally,” he predicted, arguing that monetary and fiscal stimulus will continue pumping liquidity into markets and boosting asset prices in the weeks to come.

“Leon Cooperman captured it really well: “Even if you’re worried about the world, you want to be a fully invested bear,'” he added, referring to the billionaire investor’s current stance on markets.

Read the original article on Business Insider