Top investor predicts ‘pendulum’-like, ‘uncertain’ economic recovery

The White House predicted that despite the sharp economic decline in the U.S. due to the coronavirus pandemic, there will be an equally sharp turnaround, comparing it to a V-shaped curve, but Mohamed El-Erian, chief economic adviser at Allianz, does not believe it will be that easy.

El-Erian told “Fox News Sunday” that while he hopes President Trump’s forecast is correct, he foresees a more drawn out and unpredictable recovery.

“We were operating in a normal world,” El-Erian said, “we then swung all the way to the other side to a lockdown and now we’re going to swing back and forth trying to find where the new equilibrium is. So it’s not going to be a neat v, it’s more going to be a series of w’s.”

He went on to say that “we don’t know the magnitude of the swing and we don’t know the duration of the swing, or the settling point. So it really is an uncertain outlook.”

With this in mind, El-Erian said that relief packages from the federal government have been very helpful given skyrocketing unemployment figures and low industrial output.

“We are hurting, and thank God that Washington has reacted on the relief measures.”

El-Erian then pointed to what he called the “second phase” of dealing with an economic downturn, which is trying to keep societal unrest at a minimum.

“This is not just about winning the war on a global depression and a U.S. depression. This is about securing the peace, about making sure that we emerge from this also strong.” He said infrastructure and safety nets will be “critical” to prevent “a new normal of really mediocre growth and greater social tensions.”

You might also like