- There's not enough evidence an incoming recession will be short and shallow, Mohamed El-Erian warned.
- El-Erian noted that mild recession calls were similar to the ways people dismissed rising inflation last year.
Predictions for a coming recession are too complacent, and there's isn't enough evidence that a coming downturn will be short and shallow, top economist Mohamed El-Erian warned.
"People are rushing to say, 'don't worry. If we end up in a recession it will be short and shallow.' I say keep an open mind," the chief economic advisor of Allianz said in an interview with $4 on Monday.
El-Erian pointed to the similarities between calls for a mild recession and the insistence from some observers, including the Federal Reserve, that rising inflation was a $4 That description has since been retired by the Fed officials, and inflation reached a 41-year-high in June amid what critics have said was a $4by the central bank. El-Erian suggested the current views on a recession may be making a similar mistake.
"I hope we don't end up in a recession, but if we do, there isn't enough evidence to suggest it's short and shallow," El-Erian warned.
Other experts though have pointed that strong economic fundamentals could bolster the US against a painful downturn. Despite the Fed's aggressive rate hikes, the labor market is still strong and household and private sector balance sheets remain on solid footing. Some economists, such as $4, noted that inflation often lags behind the official statistics, meaning high prices are likely already well under the reported figures.
But strong fundamentals aren't necessarily "deterministic," El-Erian said. In an op-ed for the $4 on Monday, he warned that the insistence that a downturn would be mild was in response to "unsettling" economic conditions. He recently warned that the US was already headed into a $4, predicting that $4 due to ongoing supply-chain issues and changes in globalization of the economy. US bonds are also showing signs of dysfunction, which could create stability issues in the financial system and spur "$4," he added.
While he believes a recession was not unavoidable and $4, he urged markets to prepare for a number of possible scenarios.
"Scenario planning for a wider range of possible outcomes is hard work and takes time, and much of it will eventually prove redundant. Betting on a shaky consensus forecast, however, could prove much more damaging," he said.