Despite the recent rise in consumer and investor sentiment, the economy isn't out of the woods yet, says Mohamed El-Erian, co-CEO of money manager Pimco.
The sharp increase in interest rates represents a troubling sign, he told CNBC.
Treasury bond yields and mortgage rates jumped to four-month highs Wednesday. And the spread between two-year Treasuries and 10-year Treasuries soared to 275 basis points, a record peak.
"People are worrying about potential inflation," El-Erian says. "They're starting to worry that the emergency liquidity is not going to be drained on a timely basis because of political issues."
Bottom line: "What the market is saying is this is a very delicate time and it's very important that it be navigated well by policymakers and investors."
Economic strength isn't widespread, El-Erian points out.
"With the exception of a bounce in inventories, which we're going to get because inventories have really been run down, it's not clear yet what other component of demand can grow on a sustainable basis," he says.
Enthusiasm has arisen over the stock market rally and the bank stress test results. "So we've had a bounce," El-Erian says. "It's a cyclical bounce, but it's too early to say 'victory.'"
Others agree that the economy remains on precarious footing.
"I'm thinking that unfortunately the world economic situation is precarious now, and I'm worried about this recession," Robert Shiller, an economist at Yale University, tells FT.com's video site.
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