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Guggenheim's Minerd says market turmoil puts further Fed rate hikes on hold

January 20, 2016 11:49 AM EST

Scott Minerd, Global Chief Investment Officer at Guggenheim Partners speaks at the 2014 Milken Institute Global Conference in Beverly Hills, California April 28, 2014. REUTERS/Lucy Nicholson

By Jennifer Ablan

NEW YORK (Reuters) - Scott Minerd, the global chief investment officer of Guggenheim Partners, said on Wednesday the current market turmoil puts further rate hikes by the Federal Reserve on hold and increases pressure on China to make radical adjustments.

The selloff since the start of the year continued on Wall Street on Wednesday, led by energy stocks, as crude oil prices fell to new lows and on deepening fears of slowing global growth. The selloff was broad: All 30 Dow components were lower and all the 10 major S&P sectors were also in the red.

U.S. crude prices sank to their lowest since 2003 and Brent held close to 12-year lows as a supply glut bumped up against bearish financial news that deepened worries over demand.

"The ongoing market turmoil puts further rate hikes by the Federal Reserve on hold and increases pressure on China to make radical adjustments, such as a rapid devaluation of the yuan to spur growth in domestic export industries," said Minerd.

"While these policy moves are likely to cause violent swings in prices for risk assets, it could accelerate global rebalancing, allowing growth to stabilize while buying more time for an orderly restructuring of global debts."

Guggenheim Partners has $240 billion in assets under management. Minerd, who has been a buyer of bank loans and high-yield junk bonds, said that if policymakers can seize the opportunity for fiscal restructuring and international coordination, "the pall can be lifted and we can realize a sustained solution to end the economic malaise gripping the global economy."

Minerd noted that according to Bank of America Merrill Lynch, the total debt of China has risen from approximately 160 percent of GDP at the beginning of the financial crisis to over 280 percent today. "As the Chinese economy continues to slow, a large portion of this debt will become impossible to service," he said.

(Reporting By Jennifer Ablan; Editing by Frances Kerry)



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