El-Erian sees two big risks in global markets this year.
The first is companies that are not hedged, particularly those that have a mismatch in revenues and liabilities. The number of unhedged companies in the United States pales in comparison to those in the emerging markets, he said.
The second risk is the uncertainty over central banks’ ability to repress volatility.
“They’re battling. Look at the Russian central bank today. Look at the Swiss central bank today. They’re having enormous difficulty dealing with foreign exchange volatility,” he said.
Investors will have their resilience tested this year in the face of greater volatility as central bankers lose their ability to ease volatility, he said.
The condition of the markets will be a geopolitical call as much as it is an economic and corporate call. Investors should keep an eye on Russia, which El-Erian said is a major source of concern for Europe.
“If Europe goes into recession, the U.S. is going to be impacted,” he said.
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.