Mohamed El-Erian, chief economic adviser at Allianz, says he’s just not as optimistic about the U.S. economy as the stock market and President Donald Trump’s economic team seem to be.
El-Erian is doubtful about the chances of a quick V-shaped economic rebound.
“Its very hard to say everything is going to be resolved overnight. We hope so. But I think we should buckle our seat belts. It is going to get bumpy still,” El-Erian said, in an interview on Fox News Sunday.
El-Erian said the market thinks it is in a “win-win” scenario, betting there will be a quick recovery or the Fed will come to the rescue if the economy falters.
“So there is a sense of comfort, whatever the outlook,” he said. If they’re wrong about the economy, “it doesn’t matter, because the Federal Reserve is buying assets that we never imagined it could buy.”
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El-Erian said this was too optimistic, but said “markets do what they do.”
An estimate 39 million Americans have signed up for jobless claims in the last eight weeks. That’s one quarter of the labor force and is “an enormous shock,” he said.
El-Erian said he expects a repeated W-shaped stop-go economy, more like a pendulum, where the economy swings between growth and contraction.
“This is the biggest shock we’ve had for generations. It is going to be a long time before people can convince each other that we’re healthy, he said.
In addition, consumer confidence and behavior is shaken and businesses don’t know how to operate as states are now in charge on the reopening process, he said.