The famous economist, Mohamed El-Erian, urged investors to prepare for a wave of market volatility, if the Federal Reserve retreats from the stimulus measures that it started during the period of the Covid-19 epidemic.
“I’m a little concerned that this wonderful world we’ve been living in that has low volatility, and everything in it is going up, may stall with higher volatility,” Allianz SE’s chief economic adviser and president of Queen’s College Cambridge said on “Fox News Sunday”. .
While much depends on behavioral changes, El-Erian indicated that the Fed should ease monetary stimulus.
“If I was an investor, I would realize I’m seeing a huge liquidity wave thanks to the Fed, but I remember the waves tend to collapse at some point, so I would be very attentive,” he said.
In an article on Bloomberg, El-Erian pointed out that high inflation and supply chain bottlenecks are due to transient factors. He predicted “at least another year of high inflation”.
He also said, “Things will get worse before they get better…so we will face more shortages of goods, we will have higher prices, and inflation will remain at the level of 4 to 5%.”