Mohamed El-Erian

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Last quote by Mohamed El-Erian

Unless the Trump administration can work well with a cooperative Congress to translate market-motivating intentions into well-calibrated actions soon, the lagging hard data risks dragging down confidence, creating headwinds that extend well beyond financial volatility.
Mar 27 2017 Trump Presidency
Mohamed El-Erian has most recently been quoted in an article called GLOBAL MARKETS-Shares tumble on impatience over Trump policies; euro gains. Mohamed El-Erian said, “Led by financials and industrials, the stock selloff suggests that investors may be less confident that the Trump administration's pro-growth announcements will be translated into policy implementation soon.”. Mohamed El-Erian has been quoted a grand total of 58 times in 43 articles.
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Mohamed El-Erian quotes

Things are aligning well for the market. The economy has a solid foundation. Policy is getting more pro-growth, and Congress is getting more functional. That's good for the U.S. economy. It's good for the markets.

To the extent that the deficit is caused by pro-growth measures I worry a lot less. We have space, fiscal space. But we have to use it intelligently.

If you deliver pro-growth policies, good things are going to happen. And hopefully that message will be heard not just on Capitol Hill but also in Europe and in Japan.

You shouldn't forget about the banks in Europe and in Italy in particular.

ETFs promise liquidity at reasonable prices. It's not clear that some of the ETFs in the high-yield space, for example, can actually provide that. If you're looking for where the risk has migrated, it has migrated ... within the non-banks, to the assumption that liquidity will be there when the paradigm changes. And what we've found over and over again is when that happens ... liquidity becomes very elusive.

Don't underestimate their inclination to normalize after too many years at artificial low rates.

For the first time in a very long time, I think the market is underestimating how much the Fed will actually hike. We're getting out of the world in which the Fed is the only game in town policy-wise. I think the Fed will become more strategic. [It's] going to be comfortable about the overall state of the economy, it's going to see a fiscal expansion coming, and it's going to be less data-dependent and more strategic.

The hope is that the U.S. continues based on policy announcement becoming design and implementation, and I think that will happen, but we also need the rest of the world to get its act together.

What you're basically seeing is a romance of reflation. It comes from the president-elect's emphasis on pro-growth policies.

[Trump] has picked ... people who are committed to pro-growth, who have a feel for this.

He's going to do tax reform, both corporate and household. He will look again to regulation, with a view to deregulate. He will tinker with Obamacare. He will have a major infrastructure program. And he will also look to reform the energy [industry].

If current market moves hold or go further, there is likely to be quite a bit of de-leveraging and forced selling tomorrow.

I would deploy capital slowly. I wouldn't go all in on Wednesday morning after a big loss if there was a sweep one way or the other.

I would caution about the Brexit argument. The Brexit argument is go in there immediately because it will bounce back fully. Be careful, this is a little bit different. The U.S. is systemically much more important than Britain is and there's lots of other uncertainties.

You need only look at how fast investors overcame their initial Brexit fears to realize that something else has been in play – and that is, enormous faith in the ability of central banks to repress financial volatility and to succeed in doing so almost regardless of political and economic developments.

Unless Congress swings in an unexpected manner in favor of the next President's party, whoever is elected to the White House would find their degrees of freedom quite limited – especially given some of the statements that have been made on the campaign trail.

Should the outcome of the Italian referendum go against Prime Minister Renzi, you would have to ask if we are getting closer to that point.

The risk of financial instability down the road is getting higher and higher. And the longer we stay at these artificial, ultra-low rates the more we fuel financial instability down the road.

The remarks are unlikely to have an immediate impact on Bank of England policies. But they are part of a broader warning that is applicable to central bank autonomy around the world.

Her statements are even more notable because they come from a country that has benefited enormously from economic and financial internationalization, and from a government that, in the aftermath of the Brexit referendum, was shielded from unsettling financial instability by effective measures from the Bank of England.

Deep-rooted anger, an asymmetrical turnout, and yet another referendum miscalculation by 'expert opinion' seem to also have played a role.

Deutsche Bank is not Lehman and does not threaten a 2008-like 'sudden stop' to the global economy.

What that does is it completely paralyzes governments, and it allows central banks to step in, and central banks feel compelled to step in.

The government's 'go slow' negotiating approach, together with a reluctance to provide frequent updates, calms markets in the short-term. To avoid disorderly volatility down the road, the government will need to pivot to a credible alternative to the current EU trading arrangements coupled with policies to compensate for possible growth shortfalls.

While the Federal Reserve held rates unchanged, the highly unusual 7-3 vote points to the depth of its policy dilemma and makes a December hike more likely.

This mixed jobs report puts the Fed in a tricky situation. It's not all-around strong enough to assure a September interest rate hike. But it's solid enough to engender a heated policy discussion.

What makes that probability go a lot higher a Friday report that has three things: job creation in excess of 180,000, wage growth going up and no significant move in the participation rate that pushes the unemployment rate up.

It'd be very hard for them not to hike if jobs, the participation rate and wages are all saying you got to go forward because we're near full employment.

They can't even reach the current inflation target. The truth is it's up to other government agencies to step up to the plate. The Fed has been the only game in town for too long and if it continues like this the collateral damage could be quite large.

[But] in fact, you get counterintuitive results. People save more. The financial system starts fermenting.

We as a society fell in love with finance as the engine of growth. Up to 2008, we depended on private finance. Since 2008, we've depended on central banks. We have forgotten what it takes to growth an economy in an inclusive manner.

Politicians are not stepping up to the plate. If we're not careful we're going to take a turn where slow growth turns into recession.

It's all outflows, so he's going to have a reality check with the balance of payments pretty soon, and that's going to have some consequences beyond Turkey.

Long term, we're building up for a lot more volatility down the road.

We have this massive disconnect between domestic economic conditions and a yield curve that prices lots of other things in the economy, and that disconnect is something that we don't quite fully understand, but it's most likely going to lead to a further disconnect between economics and finance.

I don't think the Fed's inconsistent. I don't think they've lost credibility. But if you're data-dependent, you're going to look inconsistent.

We're going to hear a lot more from Fed officials and they're all going to be telling us one thing, which is the market is still underestimating the expectation of a rate hike this summer.

They were worried the market was underestimating a rate hike this year.

If you work backwards, we will definitely have a rate hike this year, maybe two. How early? July. Could it be June? Yes, but the polls for Brexit would have to give them a lot of confidence that British citizens will vote to remain. It's hard to say between June and July, because they've got this massive Brexit vote on the 23rd.

Whether the Fed ends up hiking in June depends on a continued gradual improvement in the labor market and wage expectations, together with relative economic and financial calm internationally.

With the horrible tragedy leading to some short-term restraint to French GDP, equity markets are likely to open lower with both government yields and the euro falling.

No one can escape the implication of a further deterioration in the US fiscal situation. And it's not just about the US, it's also about the global economy. The US is at the core of the global economy.

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