The global realignment is accelerating the migration of growth and wealth dynamics from the industrial world to the larger emerging economies.
From Mohamed El-Erian
Simply put, investors should own less equities, more bonds, more global investments, more cash and more dry ammunition.
The world is on a bumpy journey to a new destination and the New Normal.
Investors have few spare tires left. Think of the image of a car on a bumpy road to an uncertain destination that has already used up its spare tire. The cash reserves of people have been eaten up by the recent market volatility.
Investors have to ask themselves two questions. How much can we grow our investments? And, can we afford our mistakes?
Investors should invest on what they know. The biggest mistake is to invest on what they don't know.
Most people are under exposed to global assets, including foreign stocks, bonds and currencies.
Because in the New Normal you are more worried about the return of your capital, not return on your capital.
The once-unthinkable loss of the AAA rating will constitute a further hit to already fragile business and consumer confidence.
Investors should be cautiously positioned as the global economy and markets face major uncertainties. The downgrade will be a further headwind to growth and job creation in the U.S.
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