According to Mohamed El-Erian, the chief economic adviser at Allianz SE, says that the Dow Jones could experience wild fluctuations in the coming months. Although many other investors believe that we might experience a recession in the near future, El-Erian considers that these concerns are exaggerated.
The US economy will continue to grow during 2019, says the analyst. He considers that there will be a growth rate between 2.5% and 3% but wages will continue to rise to 3% or more.
During a conversation with FOX News Sunday, he commented:
“Don’t be surprised if you see these 1,000-point swings in the Dow Jones. That is our new reality for a while. It reflects that we’re coming from a very good 2017. People forget that. Everything went right in 2017: higher returns, no volatility.”
He went on talking about a possible recession in the United States and around the world. However, he said that these comments are not going to become true in the future. Media outlets and analysts have been warning about a recession during the coming years due to the FED’s interest rate hikes.
According to El-Erian there are three important things going on in the world right now. The first point he marked is the fact that the global economy has become more uncertain. This is due to European and Chinese problems rather than issues in the United States.
The second thing he mentioned is related to central banks. On the matter, he commented that they are no longer buying securities and keeping interest rates really low. The third thing is that behaviour changed on Wall Street. Now investors do not buy the dip but they sell every rally.
Donald Trump has also been criticizing the FED decision to increase interest rates, and several commentators and analysts, including El-Erian, say that the criticism he makes is unusual. El-Erian explained that the Federal Reserve has to improve its policies and show Americans that it really knows how the rate hikes affect citizens and the economy.
On virtual currencies, El-Erian said that they will definitely survive the bear trend in which they were during 2018. Bitcoin (BTC), for example, fell more than 82% since its all-time high in December 2017. Although he is very positive about virtual currencies, he says that they will not be replacing fiat money anytime soon.