What signals? Wall Street is repeatedly issuing warnings to "avoid U.S. stocks"...

Ask AI · Expert Safe-Haven Warnings: What Risks Hide Behind the Divergence From High US Stocks?

Cailian News, April 2 (Editor: Huang Junzhi) Recently, another alarm has been sounded by the professor who first issued a K-shaped economic warning to the United States: the US stock market may be overly optimistic about the Iran war. Economist Peter Atwater has released his latest view, saying that he will avoid US stocks.

Peter Atwater is often regarded as an economist who popularizes the “bifurcated recovery” theory. When further explaining, he said that investors are underestimating a scenario: because inflation caused by the Iran war, US companies will be affected or punished overseas.

“The reason I’m not buying is that I don’t think investors have fully realized—what I believe is the biggest consequence of this war right now: that the US will be blamed by other countries in the world as the culprit behind a sharp rise in local living costs,” he said in an interview.

Atwater said that while there is currently no evidence indicating that the US will be blamed for inflation brought on by the war, due to intensifying trade concerns and geopolitical tensions, the US’s global reputation has clearly declined over the past year. In fact, as early as mid-last year, a study released by the nonpartisan Pew Research Center showed that the US’s favorability ratings were declining across more than half of the countries covered in the survey.

On the other hand, Atwater also pointed out that US companies are threatened overseas as well. On Tuesday, the Iran Islamic Revolutionary Guard Corps issued an announcement stating that it would designate as targets companies and institutions related to 18 US information and communications technology and artificial intelligence (AI) enterprises in the Middle East region.

“I’m concerned that this will have an impact on US companies operating globally. I think we have, without realizing it, created a situation where the US could be blamed for a lot of things that aren’t reflected in current market prices,” he added.

The US-Iran war has already caused the stock market to experience a month of intense volatility, but the benchmark indices are not far from their historical highs. Moreover, with the parties’ stances easing over the past two days, US stocks seem to have a “come-back” momentum.

No exception. Mohamed El-Erian, Allianz’s chief economic adviser and former PIMCO chief investment officer, also pointed out this week that, as the US-Iran war has entered its second month, he is currently avoiding the stock market—especially broad stock indexes.

He noted that rising oil prices have triggered a series of economic consequences, and said that the market now must deal with the risk that demand shocks may begin to spread throughout the economy. He said, “My risk response has shifted from reducing risk to completely avoiding risk, and now, although some stocks look attractive, I won’t enter the market or buy indexes at this time.”

Deutsche Bank has also previously pointed out that during the US-Iran conflict, the stock market’s moves seem different from past geopolitical conflicts, and that US stocks still have plenty of room to fall.

Meanwhile, as the war continues, economic worries surrounding it are also intensifying. The market’s main concern is that rising oil prices may trigger inflation. This could later put pressure on consumers, thereby weighing on economic growth, especially since the US economy’s growth rate has already slowed.

Atwater said that the economic impact of rising oil prices could hit lower-income groups particularly hard. He speculated that as the chain reaction of the Iran war gradually spreads to the economy, food shortages may become a bigger problem for low-income households both in the US and in other countries.

He added that the closure of the Strait of Hormuz not only blocks energy transport, but also affects other commodities—for example, fertilizers—which is expected to push up food prices.

“One thing I’m paying a lot of attention to is the ability of ordinary people at the bottom to make ends meet and stay fed. We know this is an increasingly serious problem, and I don’t want to see the Arab Spring happen again,” he said. More than a decade ago, the trigger for the Arab Spring was also rising food prices.

(Cailian News, Huang Junzhi)