Despite recent concerns over the US economy, especially after a wild week for equities, Alliance chief economist Mohamed El-Erian said on Sunday that a recession is unlikely to occur.
"It certainly will not be a reality," said El-Erian, "Fox News Sunday. "They would either have to make a big mistake in politics or have a massive market accident to drive us into recession. But we will slow down if we do not build on the policy of growth. "
US. Stocks fluctuated sharply last week but avoided a bear market. For the first time, the blue chip index gained more than 1
The Dow ended the week at 23,062.40, down 2.7 percent. The S & P 500, which barely missed the bear market, ended the week down 2.9 percent to 2,485.74. The Nasdaq Composite gained 4 percent, closing the week at 6,584.52.
El-Erian noted that the volatility that Wall Street is experiencing is not only due to Washington news, but also due to the changing insecurity of the global economy. Behavior with central banks – such as the US Federal Reserve and the European Central Bank – and on Wall Street.
"It's no longer about buying every dip, but selling every rally," he said of thinking on the road. "So it's busy and it's amplified by the computer trade. That's why it's really important to focus on what works, and that's the US economy.
With markets starting to recover from their worst December since 2009 in the New Year, El-Erian expects stock market volatility to continue, saying it was not uncommon to see more 1,000 points of fluctuations in the Dow. The economist sees a brighter outlook for the US economy in 2019 and sees growth of 2.5 to 3 percent, with wages continuing to rise 3 percent or more.
"This reflects the fact that we are coming from a very good 2017," he said. "Everything went right in 2017. Higher returns, no volatility and high correlation."
El-Erian also commented on the state of the Federal Reserve and its chairman Jerome Powell, who was critically examined by President Trump in the past year. Recently, Trump said, "The only problem of our economy is the Fed," and has reportedly attempted to fire its chairman, something that Finance Minister Steven Mnuchin and the incoming White House Chief of Staff Mick Mulvaney rejected to have.
"Even the Fed understands that it needs to communicate better," said El-Erian, adding that the central bank needs to be more sensitive to the markets and recognize that it can not leave its "really important political tool". the Bundesbank rate on autopilot.
"The President has one point to say:" Fed, get a picture of what's going on beyond the tight, tight domestic economy, "he said." I think you do not want the central bank's independence too much The independence of central banks is very important for economic stability, and economic stability is the key to economic growth. "