The realignment of prices and subsequent end of low volatility does not mean everything will fall apart, but markets do face a tipping point, El-Erian said.
“Either we tip to genuine growth and central banks being able to cope with this change in the global paradigm, or we tip to something worse, and I think the probabilities are pretty equal right now,” he said.
“What I feel strongly about is we’re not going to be able to maintain for one or two more years this low-volatility paradigm where central banks repress major prices,” he added.
Asked about comments from his former Pimco colleague Bill Gross that the good times have passed, he said that is one possible outcome.
The other outcome is investors see a pivot to stronger fundamentals, which would not only validate existing prices but push them higher, he said.
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.