The bloodletting on Wall Street and across the global financial markets will end eventually, but not before there’s more discomfort, according to Allianz Chief Economic Adviser Mohamed El-Erian.
The world, as we know, it is going to temporarily change. We will look around in our everyday lives and see an alternate reality as if we are “strangers in a strange land.”
In his editorial Mohamed EL-Erian, Allianz chief economic advisor points to the highly unusual period; we are living through in battling the coronavirus and how the shutdowns are increasing in the number of businesses and personal activities. While El-Erian says the damage being done is reversible over time, he warns that “we are likely to feel a lot more unsettled first due to the five main drivers of this unprecedented situation.”
The five main drivers in this economic destabilization include…
1. The unusual nature of the economic shock.
2. The economics of uncertainty and fear.
3. Policy effectiveness.
4. Financial market over-reaction
5. Over-extended initial conditions
This editorial is a must-read for every investor, professional money manager, and economist. The President’s speech Friday afternoon managed to send the Dow Jones rallying over 1,900 points into the close and may set the stage for a rally next week. The damage that has already taken place and that which will come as hospitals are overrun in the next 2-3 weeks, is likely to set up a retest of the lows hit this past week.