We're living through change,says PIMCO's co-CEO and co-Chief Investment Officer Mohamed El-Erian.There is lots of transition friction and tension.A lot of improbable things have happened.What the markets are doing is pricing that in.It's more of a square root symbol,leveling off at about 2% growth.There is something fundamental going on,an ongoing structural change.It's all about balance sheets.
The emerging markets had a small heart attack.When the big one came,they had better conditions.It's a good thing we have them there.It's gonna take 2-4 years for the new normal to play out.Only the corporate sector has a healthy balance sheet in the U.S.The market is telling us that balance sheets matter.
The U.S. economy is on a bumpy journey to an uncertain destination-without many spare tires.All indicators are flashing yellow:employment,retail sales and the flow of funds.If you do the bottoms-up analysis,there isn't a sector that's big enough to do the serious heavy lifting.Private sector de-levering and government re-levering are not the formula for growth,but for a multiyear adjustment.We as a financial system are de-levering.Until that is over and we recapitalize,that cycle hasn't been completed.It's definitely a new world,in Mohammed El-Erian's opinion.
Mr.El-Erian is a fan of the New York Mets and Jets,he professes with a smile.
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