Mohamed El-Erian on current conflic and economy, he sounds much more cautious than what he did before:
- Markets currently trading as if Israel’s conflict is contained, but if not the case, the outlook will be for a weaker economy along with inflationary pressures. This needs to be a constant question for investors and not something given
- He is mostly worried if there is scalation and more parties start to get involved
- Current uncertainties are a combination of geopolitical risks, policy mistakes, and insufficient growth
- We currently have a significant move higher in yields, a significant rise in oil prices, and a significant rise in the dollar. Those 3 factors combined usually break something in the financial system according to him
- We seem to not be done with interest rate risks yet, and we still have credit and liquidity risks in the background.
- He thinks currently we are living in a world of inflexible supply, and the FED needs to acknowledge 2% target could not be realistic to get as quickly as they desire, before making another mistake.
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