The U.S. markets have rallied since the presidential election in November, but will it continue? Allianz Chief Economic Advisor Mohamed El-Erian appeared on the FOX Business Network Thursday to discuss the markets and the outlook for Federal Reserve policy.
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“We’ve come a long way quickly, right. We’ve surged since November. And now the market is saying, ‘okay, I like the tone, I like what I’m hearing in terms of headlines about tax reform, infrastructure, about deregulation – but what about the details?’” El-Erian told host Maria Bartiromo.
El-Erian raised concerns that delays in unveiling more details on policies such as tax reform could put the market rally at risk.
“And what the market is looking for is greater policy details and the longer it takes for these details to emerge, the more pressure on the rally that has been pretty remarkable since November.”
El-Erian forecasted that the Fed would raise interest rates next week.
While El-Erian doesn’t believe a bad February jobs report would derail a potential rate hike, he predicted a particularly strong report could influence Fed policy for the rest of the year.
“If the report is very strong, and the ADP numbers suggest that it could be…then look for the Fed to signal a lot more about what’s coming in the rest of the year. And I think we get at least, and I stress ‘at least,’ three hikes this year.”
Though El-Erian sees opportunities in the markets, he cautions investors to be aware of the potential political risks.
“I would be careful overall, but I would do a certain amount of rotation. For example, tech continues to lag in the U.S.; there’s opportunities there. Emerging markets, yes they’ve come a long way, but there’s still pockets of value. So I would be incredibly selective at this point, waiting to see how the political risk plays out.”