Tags: El-Erian | investors | outlook | market

El-Erian: 'Investors' Outlook Is Likely Excessively Rosy'

By    |   Wednesday, 17 Sep 2014 11:08 AM

Investors in financial markets are ignoring geopolitical and economic problems across the globe, as they bid asset prices to ever-higher levels, says Mohamed El-Erian, former CEO of fund giant Pimco.

And that blithe attitude could well come back to bite them, he writes in an article for Project Syndicate.

"In the next few months, the buoyant optimism pervading financial markets may prove to be justified," El-Erian argues. "Unfortunately, it is more likely that investors' outlook is excessively rosy."

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

So what are the problems? On the geopolitical front, there's military conflict in Ukraine and the Mideast, he notes.

"Meanwhile, on the [economic] policy front, advanced-country monetary-policy cohesion is giving way to a multi-track system, with the European Central Bank stepping harder on the stimulus accelerator, while the Federal Reserve eases off," El-Erian asserts.

Uncertainty abounds in emerging market economies too, he explains.

"These factors are sending the global economy into the final quarter of the year encumbered by profound uncertainty."

Investors have been "brushing aside today's major risks and ignoring the potential volatility that they imply," El-Erian adds.

"Instead, financial investors have trusted in the steadfast support of central banks, confident that the monetary authorities will eventually succeed in transforming policy-induced growth into genuine growth. And, of course, they have benefited considerably from the deployment of corporate cash."

Corporate CEOs apparently aren't too impressed with the economy.

In the United States, a Business Roundtable survey of 135 of its member CEOs, conducted last month, indicates they are concerned about the economy.

"While some economic indicators are improving moderately, the results seem to reflect an underperforming U.S. economy held back by policy uncertainty and growing conflicts around the world," Randall Stephenson, chairman of Business Roundtable and CEO of AT&T, says in a statement.

"We believe Congress and the administration must focus on policies that drive economic growth, including tax reform, immigration reform, trade expansion and long-term fiscal stability."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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Headline
Investors in financial markets are ignoring geopolitical and economic problems across the globe, as they bid asset prices to ever-higher levels, says Mohamed El-Erian, former CEO of fund giant Pimco.
El-Erian, investors, outlook, market
339
2014-08-17
Wednesday, 17 Sep 2014 11:08 AM
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