El-Erian Says Biggest Risk is Political Around the Globe

Even though the Federal Reserve has opened the discussion about what to do with its nearly $4.5 trillion balance sheet at the same time as increasing interest rates, politics rank as the top risk for financial markets, Allianz’s chief economic advisor, Mohamed El-Erian, told CNBC on Monday.

“The biggest wild card is the politics. It’s really important here, Europe, Middle East, North Korea. There’s a lot of moving pieces,” the former Pimco co-CEO said in a “Squawk Box” interview. “The second-biggest wild card is the reaction of the economy to years and years of low, noninclusive growth.”

Maneuvering by President Donald Trump and Republican leaders on Capitol Hill holds the key to whether promised pro-growth policies, such as tax cuts and deregulation, become reality and help boost the economy or fall short and hurt the economy, El-Erian said.

“The critical thing for investors to realize is it’s become much more binary,” he said. “The new normal is becoming the least likely outcome in the next two years. We’re going to pivot one way or another.”

After the financial crisis, El-Erian at Pimco coined “the new normal” to describe a low economic growth environment with high unemployment and government debt problems.

via CNBC

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza