Noted investor Mark Mobius said Wednesday that he expects a 30 percent drop in U.S. stock markets as a result of massive outflows from exchange-traded funds.
“I think a 30 percent correction in the [U.S.] markets is not unforeseen,” Mobius, co-founder of Mobius Capital Partners, said on CNBC’s “Power Lunch.”
“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,” he said. “So we have to be ready for the volatility.”
Exchange-traded funds hold a basket of stocks and can be traded in real time. The investment product has become increasingly popular, and BlackRock predicts global ETF assets will more than double from $4.7 trillion this year to $12 trillion by the end of 2023.
U.S. stocks are in the middle of their second-longest bull market on record. In early February, the S&P 500 fell more than 10 percent from a recent high for the first time in two years. But the benchmark index has since recovered to trade about 5 percent below that high.
Mobius rose to prominence through his investments in emerging markets during his career of more than 30 years at Franklin Templeton Investments. On Wednesday, he remained optimistic on certain opportunities in emerging markets, such as Vietnam — his best investing idea — and China and India.
“This is tremendous, fast growth in these markets, and I believe we’re going to see lots of opportunities down the road,” Mobius said. “For the big markets, I’ve got to look at India. India’s got tremendous opportunities.”
