The traditional knowledge that Washington political gridlock is sweet for markets might not maintain up this time, economist Mohamed El-Erian recommended Wednesday.
“We now have to grasp that it relies upon what path you assume the economic system is on,” the Allianz chief financial advisor mentioned on CNBC’s Squawk Field as officers counted votes from Tuesday’s election to find out management of the U.S. Home and Senate.
In 2010, the economic system was on an identical path, which means it could decline with out stimulus from the Federal Reserve, he famous.
“This time round, the Fed can not step in and supply stimulus. So I don’t assume it’s excellent news that we’re not going to get something out of Congress over the subsequent two years,” El-Erian mentioned.
“We have to concentrate on a brand new progress mannequin, we have to take the provision facet extra severely, and I do assume there’s an issue that the emphasis will instantly shift to the election in two years’ time and little or no will get executed,” he mentioned.
Aside from the election, El-Erian recommended the market hasn’t but taken liquidity danger under consideration.