Markets have posted huge gains since the election of Donald Trump, but are there potential headwinds to the rally? Allianz Chief Economic Advisor Mohamed El-Erian appeared on the FOX Business Network Thursday to discuss his outlook for the U.S. markets.
“Markets are in the business of pricing not just current realities, but future ones. And they surged on the news that the election of President Trump would result in higher growth and higher inflation,” El-Erian told the FOX Business Network’s Maria Bartiromo.
But, El-Erian explained, markets are getting concerned about the lack of details available on Trump’s economic policies.
“Now, markets want to see more details. They want to see what this is going to look like, and because we didn’t get many details in yesterday’s press conference, the markets are sluggish this morning.”
With Trump’s inauguration less than 10 days away, El-Erian discussed how he would allocate capital now as an investor.
“Overall, I would reduce some of my dollars at risk, but I would allocate slightly differently. I would allocate them more to the sectors that have lagged, so less financial, more in favor of sectors that have lagged. And I would also look at the big underperformer, which is certain emerging markets – Mexico for example has been beaten up really badly.”
Although El-Erian didn’t expect European banks to have a huge negative impact on the U.S., he was concerned Europe could prevent U.S. economic growth from living up to its potential.