El-Erian Says US Only Economy With Legs

The downturn in global markets on Tuesday over concerns about Italy’s political power struggle and the possible economic fallout as a result highlights the mistaken assumption that the world was in a phase of synchronized growth, economist Mohamed El-Erian told CNBC on Tuesday.

“The mistake people made is to confuse a coincidence of a pick up in growth around the world with something that had legs,” Allianz’s chief economic advisor said in a “Squawk Box” interview. “We were just in a lucky coincidence.”

“People are now realizing the only economy with real legs to it was the U.S. economy,” said El-Erian, formerly CEO of bond giant Pimco.

In 2017, the U.S. stock market was roaring based on a number of different influences, according to El-Erian. “The U.S. was policy-led, deregulation, tax cuts. Europe [was] just in a natural healing process,” he said, while “developing countries were bouncing back” and China was in for a “soft landing.”

After hitting an all-time high on Jan. 26, the Dow Jones industrial average tanked in early February. The catalyst at the time was a higher-than-expected wage number in January’s jobs report sparking fears of inflation and interest rates rising more aggressively than projected.

Stocks on a closing basis eventually bottomed out on Feb. 8, briefly plunging in and out of 10 percent correction territory. Since then, the Dow has recovered, closing Friday about 7 percent away from its January record.

via CNBC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.