Tags: El-Erian | recession | economy | cnbc

El-Erian Sees 30 Percent Risk of US Recession by 2017

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By    |   Monday, 02 Nov 2015 10:57 AM

Newsmax Finance Insider Mohamed El-Erian said Monday he puts the risk of a U.S. recession at 25 percent to 30 percent.

"The road we're on is going to end. We cannot rely on central banks, and central banks cannot be the only game in town when it comes to policy," the former Pimco co-CEO told CNBC. "By 2017, we're going to tip only way or the other."

The chief economic adviser to Germany's Allianz, parent of Pimco, also said investors should get ready for more stock market volatility in the months ahead as the Federal Reserve and world central banks move in opposite directions, CNBC reported.

"People forget how exposed we are to financial instability in the rest of the world," said El-Erian, pointing to the August spike in the CBOE Volatility Index, known as the “fear” gauge, as the stock market sank to its lowest levels of the year, CNBC reported.

Despite some economists warning that the American economy has slowed, Business Insider cites six reasons why the U.S. “is not doomed” to slide into a recession.

“While it's always good to be on guard, it seems that most of the evidence supports the argument that the economic expansion still has a ways to go,” Business Insider reports, citing may economists’ bullish forecasts.

The half-dozen reasons to be optimistic from BMO Capital's Brian Belski:
  • Long-term rates are higher than short-term rates. Recessions usually happen when the opposite is true;
  • Manufacturing surveys continue to signal growth, but at a slower pace;
  • Consumer confidence is still rising;
  • Homebuilder sentiment is the most optimistic since 2005;
  • Sales of autos and other big-ticket items are still rising;
  • Weekly claims for unemployment insurance are at their lowest in 15 years.

"We believe a US recession remains years away," Goldman Sachs Asset Management wrote recently, reflecting the broader consensus among those on Wall Street.

However, other experts are concerned about a global recession, which in turn could spark a U.S. economic downturn.
 
Citigroup economist Willem Buiter warns that the global economy is performing substantially below potential output, which he uses as the general benchmark for the idea of a global recession. With that in mind, he said the chances of a global recession in 2016 are growing, the Fiscal Times reports.

"We think that the evidence suggests that the global output gap is negative and that the global economy is currently growing at a rate below global potential growth. The (negative) output gap is therefore widening," Buiter said in a note to clients.

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Newsmax Finance Insider Mohamed El-Erian said Monday he puts the risk of a recession in the United States at 25 percent to 30 percent.
El-Erian, recession, economy, cnbc
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2015-57-02
Monday, 02 Nov 2015 10:57 AM
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