El-Erian on Recession Odds

PIMCO’s Mohamed El-Erian says that if the U.S. avoids the “fiscal cliff”, he and PIMCO don’t think the U.S. will enter recession in 2013. El-Erian tells Bloomberg that he thinks we’ll continue to see sluggish growth in the 1.5% to 2% range as the economy continues to heal. “The big question for us is how effective will policy support be,” El-Erian says, explaining that he thinks Federal Reserve policy support has become less effective as… Read More

El-Erian On How To Handle The Fiscal Trouble

PIMCO’s Mohamed El-Erian says policymakers trying to address the country’s fiscal problems should focus on getting businesses and individuals to put the “ton” of cash now sitting on the sidelines to use, both via investment markets and capital spending. “If you make that your objective, you’re going to move not only just on fiscal reform but on labor market reform, on credit market reform, and on housing reform, and that’s what this country needs,” El-Erian tells… Read More

El-Erian on Sandy’s Economic Impact

Just what impact will Hurricane Sandy end up having on the economy? PIMCO’s Mohamed El-Erian recently tackled that question in a piece for CNBC.com. One of El-Erian’s key points was that the government likely won’t be able to play its usual role in the recovery, with more being required of the private sector. “In more normal times, we would look to federal, state and local governments to increase spending, particularly on reconstruction and rehabilitation of… Read More

El-Erian: ‘Central Bank Put’ Won’t Last Forever

PIMCO’s Mohamed El-Erian says global central bank policies have inflated asset values beyond what fundamentals merit, and says that won’t last forever. “That central banks are essentially ‘all in’ is, in the short term, good news for all types of markets,” El-Erian writes in a piece for CNBC.com. “Yet … investors should not get too carried away. There is a limit to how far and how long prices can deviate from fundamentals. This is particularly the… Read More

El-Erian: Risk/Reward of QE3 Getting “Less Favorable”

PIMCO’s Mohamed El-Erian says the Federal Reserve shouldn’t do anything that would disturb the bottoming of the housing market, and says the risk/reward outlook of another round of quantitative easing is getting “less favorable”. El-Erian tells Bloomberg’s “In The Loop” that he thinks the housing market is finally bottoming, though it is a prolonged bottom. He says withdrawing current stimulus or a “fiscal cliff” shock could derail the housing recovery, which he says is “critical”… Read More

El-Erian: One-in-Three Chance of Global Recession

PIMCO’s Mohamed El-Erian says there is about a one-in-three chance that the global economy enters recession by the end of the year. “Every data point that comes out tends to confirm the synchronized slowdown,” El-Erian tells Bloomberg TV. “Wherever you look, this is a sluggish global economy.” He says that sluggishness makes the global economy more vulnerable to shocks, and says that if a shock occurs the chance of recession will increase significantly.

El-Erian: Retain Optionality, Because Opportunities Will Be There

PIMCO’s Mohamed El-Erian says that it’s good news that countries like China are willing to cut interest rates to spur growth, but that there are major questions about whether that willingness will result in effectiveness. El-Erian tells CNBC that the global economy is slowing, and says that if it continues to do so central banks — including the Federal Reserve — very well may start taking action. That means investors should focus on the types… Read More

El-Erian: Be Cautious Amid Global Slowdown

PIMCO’s Mohamed El-Erian says the recent U.S. jobs report is very worrisome. El-Erian tells PIMCO that it’s part of a trend in which “every major part of the global economy is slowing, and slowing rapidly”. He says that a series of good data will be needed for the economy to achieve “escape velocity”. El-Erian also says global policymakers must get their act together to help the situation, not through more quantitative easing but by taking… Read More

El-Erian: Macro Headwinds Battling Micro Strength

PIMCO’s Mohamed El-Erian says that the U.S. economy is having trouble gaining traction, as evidenced by the latest GDP report. El-Erian tells Bloomberg that in addition to the headline growth number being lower expected, the drivers behind that growth were cause for concern. Consumer spending increased, he noted, but the personal savings rate declined, and that trend isn’t sustainable. He says that business investment is needed to drive the economy, and that wasn’t strong in… Read More

El-Erian: Unemployment Data Good, But Economy Not At “Escape Velocity”

PIMCO’s Mohamed El-Erian sees a lot to like in the March jobs report, but says a number of concerns remain for the economy. El-Erian tells Bloomberg that in addition to a good headline jobs-added number, the March data showed the participant rate going up and structural issues, like long-term unemployment, improving. But, he adds, we are not yet at “escape velocity” — where the labor market and consumers can push things forward. He says the… Read More