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

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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