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Home / Business / 1000-Point Swings & # 39; New Reality & # 39; for the Dow Jones Index: Allianz Economist El-Erian

1000-Point Swings & # 39; New Reality & # 39; for the Dow Jones Index: Allianz Economist El-Erian




Mohamed El-Erian – Allianz SE's most important economic adviser – says concerns about a US recession are overwhelming, but in the Dow Jones Industrial Average we could expect heavy fluctuations in 201

9 due to financial uncertainty in Europe and China. [19659002] However, El-Erian said the US economy will remain strong and grow at a robust rate of 2.5% to 3%, while wages will continue to rise 3% or more.

You see these 1,000-point swings in the Dow Jones, "El-Erian told Fox News on Sunday, December 30 (video below). "That's our new reality for a while."

It shows that we are coming from a very good year 2017. People forget that. Everything went well in 2017: higher returns, no volatility.

So I think that's a normalization. In the short term, it does not feel good, but in the long term, it's okay.

"Recession Will not Become Reality"

El-Erian said despite the media stories that the bipartisan political division in Washington is shared, DC is detrimental to the US economy, that's not true.

. "You have to look beyond Washington," he said. "Three things are in progress:

  1. The global economy has become more uncertain – not because of the US, because the US is doing well, but because of Europe and China.
  2. The central banks have changed their behavior. You no longer buy securities. They no longer keep interest rates low. The Fed and the European Central Bank are tightening liquidity.
  3. The behavior on Wall Street has changed. It is no longer about buying every dip. It's about selling every rally. "

El-Erian said that various factors contribute to the current market volatility, which is compounded by the computer trade.

"So it's really important to focus on what works, and that's the US "He said

[A recession is] certainly not a reality. They would either need a major policy mistake or a massive market crash to push us into recession.

However, El-Erian said the US economy will slow down if it does not build on President Trump's growth-enhancing policies.

"Communicating the Fedmaker"

When asked if Trump's criticism of the Federal Reserve is unjustified, El-Erian did not really say so. "It's certainly unusual, but even the Fed understands that it needs to communicate better," he said.

El-Erian said the Federal Reserve must do a better job of showing Americans that they are sensitive to the frequent effects Stock markets and the US economy are seeing increases.

The Fed needs to recognize that it can not be a truly important political tool for autopilots – it needs to be more sensitive to what is happening [in the real world]. As CCN reported, US Federal Reserve Chairman Jerome Powell recently raised interest rates for the fourth time in 2018.

The move prompted the Dow Jones to immediately refuel by offering a massive sell-off caused the stock market and triggered concerns about a possible recession.

This also caused a social media backlash with prominent political voices like former US Congressman Ron Paul, who was supposed to abolish the Fed.

"The president has one point to say: 'Fed, get a feeling for what goes beyond the strict rules, tight domestic economy & # 39 ;, said El-Erian.

However, El-Erian said the Fed should maintain its independence. "The independence of central banks is very important for economic stability, and economic stability is the key to economic growth," he said. El-Erian: Crypto Will Survive Bear Market

And what does Mohamed El-Erian think about the current situation? Crypto bear market?

In November 2018, he said he believed that cryptocurrencies would definitely survive the downturn and become broader, but they would not replace Fiat money any time soon.

We are experiencing a rotation – retail is becoming more sensible.

The exuberance is behind us and the institutions are beginning to establish themselves. And that's good in the long run.

Selected image from Shutterstock.

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