What's Next For The U.S. Economy: Mohamed El-Erian

Mohamed El-Erian, chief economic advisor at Allianz, says the stock market is in a "win-win" mindset as the Federal Reserve provides continued stimulus. He warns of distorted "zombie markets" and explains how some sectors will benefit while others will miss out during the economic recovery.
Beware not just of “zombie” companies but of “zombie markets” as asset prices become distorted and detached from fundamentals, warned Allianz chief economic advisor Mohamed El-Erian.
“I think we’ve got to be careful about zombie markets,” he said. “We’re not there yet, but we’re starting to get close.”
“Zombie” companies continue to operate by borrowing money, even though they are unable to pay off their debts. Record low-interest rates have contributed to a growing number of such firms over the past decade.
“They eat away at the dynamism of an economy, they misallocate resources and they eat away at productivity,” El-Erian said. “So you may be keeping them alive today, but it comes at a cost.”
El-Erian said “zombie markets” might occur when central banks like the Federal Reserve continue to prop up assets, destroying the market’s ability to allocate capital efficiently.
“Zombie markets are markets that are completely mispriced, they’re completely distorted,” El-Erian said. “Why? Because there is a policy view that you need to subsidize everything in markets for now.”
The Fed has taken extraordinary steps, including pledging to buy corporate debt and unlimited amounts of Treasurys, to keep the financial system running smoothly during the coronavirus recession. On Monday, the central bank said it would expand its purchases in the credit market to include individual corporate bonds.
The Fed’s aggressive actions have helped stocks recover from big losses earlier this year when the coronavirus pandemic started to spread across the U.S. The S&P 500 has surged nearly 40% since March 23, when the Fed first announced it would buy corporate bonds, even as parts of the economy came to a standstill and unemployment surged.
El-Erian said the Fed’s actions have created a “win-win” mentality in the stock market, as many traders expect the central bank will continue to buy assets including equities in order to prevent a financial crisis.
“The mentality of the market is if they’re willing to do high yield, they’re willing to do equities, because after all, the last thing the Fed wants is a financial crisis to make the economy worse,” he said. “The market feels very strongly that it basically is holding the Fed hostage.”
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What's Next For The U.S. Economy: Mohamed El-Erian

[@CNBC]

Do you agree with Mohamed El-Erian? Is there someone else you’d like us to interview for What’s Next? Subscribe to CNBC and let us know what you think in the comments below.

[@syibol7103]

Has the de-globalization process started? where did it start? what are the negative consequences? Are we going back to cold war era as a result of de-globalization?

[@pstolee]

@@syibol7103 If I could take a guess , China has been building a parallel systems for years. Plan B. Trump signaled it in 2016. Brexit is another one. However, it is really here that I have heard it as a movement

[@syibol7103]

@@pstolee It looks like the new trade pact www.wsj.com/articles/asia-pacific-nations-sign-major-china-backed-trade-deal-11605434779 is part of the parallel system. I hope the new administration will know what their doing re China and the rest. The US has been distracted for far too long.

[@pstolee]

@@syibol7103 Now in its exhuberant youth and breaking all records with incredible growth and wealth in the last two centuries, it is important to remember that the U.S. is just a kid . China has enjoyed cultural, economic and intellectual success for thousands of years. Economically, it fell off the map recently but that is just a hiccup in world history. With a billion people and lustrous past, China could be just coming back to where it has always been. First. What I find truly incredible is that the U.S., with about 4% of the world's population had about 50% of the world GDP after WW II. Two world wars that were not on U.S. territory helped.

[@Leorio555]

FINALLY someone who speaks the truth instead of BS on how well the stock market is doing

[@toordog1753]

Where have you been? All I here is negative all day every day....

[@mattpatrick2564]

This guy missed the easy ride off the bottom, now we are at the danger zone.. for sure.

[@IIOctaneII]

My stocks have been dipping lol

[@ZoomerTrader69420]

Octane did you buy hertz

[@Shadesof]

Leorio555 the guy is the brightest I have seen in a while 👍

[@true-liberal2002]

I can listen to his analysis all day. I wish he was our treasury secretary.

[@felixthefoxMEXICO]

No! that'll muffle him.

[@true-liberal2002]

Agree, but he might be our “ canary in the coal mine” like Anthony Fauci.

[@vcoonrod]

Her voice,though,sounds like a kazoo or someone pinching their nose shut when they speak. She needs voice help as it will hold her back, and clearly she is bright,

[@TheMagicalPoison]

Even so, you still need a wise leader who will listen to him.

[@bla-ig4bd]

3:00 - This is the first time I hear from ElErian directly calling the Fed to stop what its doing, "if it continues doing what its doing, it will become a big part of the problem"... Good interview and thank you Moh'd ElErian

[@paternoaparente2196]

I rarely watch interviews to the end but this one takes the cake. Well done.

[@danchatka8613]

I watch all El-Erian videos to the end. Many times I watch them twice.

[@daneoriatti5009]

Yep I enjoy his perspective greatly.

[@Shadesof]

Paterno Aparente same here 👍👍👍

[@bla-ig4bd]

Indeed... Thank you Elizabeth Schulze of CNBC and thank you Moh'd ElErian... Finally CNBC has a good reporter/interviewer.

[@K4n01]

My boy El-Erian always telling it like it is! Hes the boss.

[@pamelaojeda8879]

Where do you get your masks from? I use amazon ebay and buymasks.equipment right now. Looking for more options

[@emrazum]

Why is this channel so much better than TV CNBC?? amazing reporting here, partisan hackery on air. Elizabeth needs a raise/ should run the whole company

[@Shadesof]

DarlEng that’s why I don’t tV anymore ...

[@oanagonzalez4653]

So nice to hear the truth for once...Thank you El Erian, and interviewer who asks the right questions...

[@stevesmythe8556]

I can't remember anyone before him provide a macro economic analysis this well before.

[@jamilkawa]

Mohammad El_Erian is always thought provoking. A great source of wisdom

[@yenyoo]

Turned out he was very wrong haha

[@Nagare89]

Mr El-Erian answers the questions very well. His points about certain laborious jobs leaving permanently are poignant. It seems like we were already headed in that direction but the the pandemic has accelerated that trend.

[@proudmanboobsowner8620]

The only reason keeping the stock market growing is the FED.

[@camerontaylor7471]

And guess who owns the FED... The SAUDI ARABIAN ROYAL FAMILY! ... why do you think the financial advisor is middle eastern? Lol subliminal messages people! Pay attention!

[@misterj1396]

Indeed

[@arjunyeleshwarapu]

cameron taylor tf are you talking about

[@Unbeatable0007]

@@camerontaylor7471 what?? What are u talking about? Subliminal messages? I couldnt find them

[@sst1mm221]

Audit the Fed and FOMC ... Many issues in the NYSE and US Money Supply M0

[@TheJadekungfu]

A really good dose of factual and intellectual optimism.

[@timstein9779]

Dr. El-Erian is one of the best minds out there. I always watch him on Bloomberg and CNBC.

[@karanved9385]

Great content @CNBC!

[@vanessa271]

Always love to hear Mohamed's thoughts and comments!

[@annaartyushina2247]

Very interesting, thanks!

[@bla-ig4bd]

If you are fed up with the fed inflating asset prices and contentiously distorting markets and causing capital misallocation. Like this comment....

[@tylernadeau7524]

bla0092 keep in mind assets will likely remain inflated going forward as investors will likely stay away from non-equity assets as interest rates will likely remain at historic lows.

[@chuckles069]

Inflating assets with low rates just means GLD&SLV are order of the day/year.

[@TS-mq2mm]

Mohamed is a very intelligent Adviser/ Love it SIR . THANK U

[@mariarivero9567]

He is always level headed and generally speaks the truth thanks for having Mr. El Erian

[@randomrandomness8743]

The best analysis I've seen so far on CNBC, thank you.

[@simoncrooks7441]

thanks, good interview, El-Erian made some good points

[@mahernajjar1255]

Great interview!

[@tshaw7001]

I always wanted to explore your train of thought, I just got a glimpse of it.. thank you

[@eshmunvideochannel2019]

"forward looking = overvalued"

[@jerryrichardson2799]

Likely and voted up.

[@ivanalcantar6841]

Great interview

[@jebushcrist]

Good interview. Thanks

[@jfuite]

Wow, CNBC, good interview. How about rebuilding your entire channel around these two?

[@zahirulhossain8795]

CNBC compared other channels have a good reputation for being unbiased

[@pachendezvictor]

The best interview in 2020. Great Work

[@AbuSous2000PR]

this is Mohammad's best...by far... he usually repeats his idea...but in this interview..he add a lot more Thx

[@casparcoaster1936]

really worth my time watching this, economically, and, emotionally, and, it's very entertaining, and, many thanks, and, well, guess that's all.

[@KD-rt2yd]

Finally a CNBC host that doesn't interrupt her guest....

[@CarbageMan]

This is an "assembled" interview. It was not interactive.

[@everglades_n_co.]

His interview is prerecorded and edited with her question. No way she can interrupt even if she wants to.

[@aazzsameen984]

Informative

[@dwaynerichard4359]

Great interview.....

[@rd9102]

Great video, i wish he was on more.

[@arabyalyemani5855]

Honest and Truthful guy telling us the fact and truth about where we are and what we need to do. Thanks

[@Kmancanada]

He was an excellent guest ! Great insight and perspective. I had this on in the background, and it didn't take long for me to stop what I was doing and sit down in front of the TV to listen attentively. Kudos.

[@Ron239]

An excellent interview.

[@samchapjoe2001]

Excellent !

[@rajatjain7894]

This person explains everything in such an easy language that you tend to have hum dont stop.

[@elizabethlibero1878]

Thank you Mr. El-Erian

[@toddodell70]

This was a wonderful, yet realistic explanation.

[@MylesGmail]

Always end on a "bright spot" so ppl wanna watch again, nice strategy that always works 😂

[@MylesGmail]

Wow thx

[@bjrnhjortshjandersen1286]

So refreshing with a reflective knowledgeable expert

[@vg1883]

Good questions and better answers. That says it all

[@JesseSinghChannel]

Wow a news segment that was actually good.

[@caialan9491]

Good view and very smart advice

[@sirus312]

very good interview

[@yizetan1855]

Great questions, great answers. Economics 101

[@mazharsoufi5270]

thank you soooooooooooooo much for bringing the big mind we love him genius

[@MichaelTheDanishHistorian]

I hope ALL share this ... this guy hits the nail SQUARE on the head!

[@anthonyballog8026]

Amazing

[@waymanharris1284]

Well said!

[@CarsSupercars]

Nice analysis

[@buttvader]

I was amazed by the way we could see his thoughts when he spoke about great acts of kindness!

[@jondawber4690]

Rates are at zero to prevent a greater depression .

[@allanj7750]

Yet all my credit card rates haven’t moved a smidge.

[@jondawber4690]

@@allanj7750 exactly

[@jarehelt]

Low interest rates caused the crash. Even if they manage to pump up another bubble the next crash will be that much bigger

[@Iwo26]

0% rates are for the Banks.. not for the People.

[@mehtacotute]

Rates were too low for too long. Most of the gains in "earnings" was simply through elimination of shares. Shares that were bought back with debt. Debt which they took on because rates were low.

[@kevins9780]

Give that interviewer a raise. She's fantastic.

[@jfuite]

I would say promote her. Fire the cheerleaders with vested interests, the other talking head salesmen, and put these two on CNBC.

[@Phlegethon]

What’s next? Rich get richer. Poor gets poorer. Tell people that they’re free. Story of America.

[@memyself7419]

Free to die of hunger and from lack of healthcare.

[@toordog1753]

Ritch are ritch because they know how to do it, the poor don't understand how so they stay poor. Don't blame the rich because there are MANY MANY MANY dollars to earn and its false to imply the rich consumed all the currency and theres a shortage. If you don't want to be broke learn about finances, im going through exactly what youre saying but there is no way I am going to allow myself to stay broke. As for Healthcare, yes people deserve Healthcare. However, they do not deserve or are in no way entitled to the products people start businesses to create, such as a drs office. Healthcare is there and just like me and EVERYONE else you work hard to afford the benefits of a Healthcare program. I in no way will ever expect free services from a business owner, its just asinine...

[@billmoyer3254]

ok victim

[@kronusx3484]

@@toordog1753 The poor do not have the money to hire lobbyists to change rules and make illegal acts legal so they can get richer. That is the big difference. When you have the money, you have lobbyists in your pocket which opens doors for more ways to get richer.

[@jobe8764]

@@kronusx3484 One does not have to be rich to educate themselves and control their own destiny. Self education trumps poverty. Public education will keep one poor. Read the Bell Curve, Rich Dad Poor Dad, and a thousand other books that will empower those willing to learn.

[@jerryrichardson2799]

An excellent interview as many have already noted, many up voted.

[@thewanderingwoodsman2654]

Great talk! He knows his stuff!

[@pranavdublish4840]

Amazing...

[@00bikeboy]

Good analysis and insights by Mr. El-Erian.

[@jimclark9826]

“Moral hazard” is a great concept but a fuzzy phrase. Basically, you win even when you lose. He makes it clear that is a big problem that could destroy everything. Great point.

[@senthilkumarn4u]

Wonderful interview...

[@maximahoro8970]

Sensible stuff. Excellent interview.....

[@ShrawanRegmi]

Loving these CNBC interviews. Great value to viewers.

[@Michael-0000]

Excellent Interviewer, brilliant analyst!

[@evilmanua]

Mohamed is the beast. Always great to hear him speak.

[@hkkhgffh3613]

Freakin insights!

[@johnaustria7649]

Mr. El-Erian sounds to me very honest in his view of the economic and stock-market future developments. His analysis sounds more profound and logic than anything else I heard/read recently about economy, stock-exchange and the influencing variables and their implications. Many thanks for this excellent interview, this is a real guidance through the storm.

[@twikat]

@Mohamed El-Erian makes difficult things look easy!!! Only genius are capable of that!!!! Congrats!!!

[@colorfulcodes]

Interesting.

[@olesleo5297]

One of the best analysis

[@mehtacotute]

While the market is forward looking, US gdp from end of 2019 to end of 2022 is expected to be -3% versus an original 10.8%. That's a delta of 13.8% after 3 full years. So unless 2023 is when GDP starts recovering faster than original projections, that 13.8% gap will never be made up.

[@letgabeequaltrue9097]

Question: Seems like the FED is going to have to let several companies fail so that risky traders back off?

[@giths19]

I foresee an ethics issue on how they decide which companies to let fail. Will they objectively or subjectively pick them? In that will they pick companies that they are heavily invested in? We've already seen what insider information led a bunch of government employees dumping stocks because they knew the Corona shutdowm was coming.

[@HandlewasNo]

They have already stated they are focusing on "fallen angel" corporate bonds i.e. companies that were reletively stable pre covid put whose bonds were downgraded there after, with a bottom limit of what bond they will buy.

[@rickdees251]

You say that like the "FED" is some god. Choosing which companies grow or wither. There are no god's just other humans impersonators and manipulators with limited (human) effect.

[@romanmartinez3701]

rick dees Money controls everything you do, the fed is separate from the government, some say above it. Fed is playing monetary god.

[@LaidbackLuc9]

A couple of companies is no problem for the FED. That's a sacrifice it is willing to make. But never a whole system. Like 2008: we can go on without Lehman, but not without Lehman, GS, MS, JPM and BoAML. There will be a backstop and some of the sectors might not come out of this pretty.

[@MrSufiSeeker]

This is a great analysis of the current and the what's to come in the US Economy in the wake of the Covid-19 pandemic. Mohamed El-Erian, Chief Economic Advisor at Allianz of Southern California is a very brilliant, analytical, and forward-looking economic adviser for the public. Two cheers to him and the interview for the intelligent and relevant questions.

[@ateeqahmad]

I am looking at the books behind him too. A very interesting selection!

[@erik0073]

Me too.

[@bettinaneumeyer6760]

He is telling the truth, I wish the MSM would talk more about it. On another note, why does CNBC have to insert little clips during the interview. We understand words and a little video is not necessary.

[@prashanthb6521]

Wise words !

[@man8dude]

I really appreciate the work Elizabeth Schulze and her team put into this series. Do you know how drone economic videos with the same cam to cam shot can get? Thank you for some fresh shots and angles

[@Manos_P_]

This man said some bold statements which everyone has to listen. On the other side, thank God we have some real cool corrected policymakers to make sure those things do not addressed as they should

[@Raymondcraw1967RaymondCrawley]

I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.

[@FaithAndrada-xo9ou]

Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks

[@AndersonFair-cy2bb]

A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850K.

[@BrewerVera]

This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.

[@AndersonFair-cy2bb]

Well, there are a few out there who know what they are doing. I tried a few in the past years, but I’ve been with 'Whitney Kay Stacy' for the last five years or so, and her returns have been pretty much amazing.

[@BrewerVera]

She appears to be well-educated and well-read. I ran a Google search for her name and came across her website; thank you for sharing.

[@neilyaremchuk6798]

This guy just hit bullseye.

[@Bradgilliswhammyman]

I'd love to see El Erian with a poster of Bon Jovi or WASP in the background.

[@jimettamarna417]

Maybe Winger

[@matrix2678]

Chaos, downturn, protests, probably hunger and war

[@ilyamoz]

OH boi he's so smart!

[@russram210]

😎

[@aaazzz1212]

He sounds smart. Speak slow and with an accent helps.

[@FloridaClay]

Excellent, and scares the hell out of me.

[@ama501nj]

So Mo has a great picture of where we are and what's happening with the markets. His comments are thought provoking and insightful but the reality is he really doesn't know where the market is going. I followed him religiously thru the crisis and on the day the market crashed in March he said don't buy. It's going to get much worse, I'll tell you when it's all clear. Then it was don't buy the dips. The market rallied for two months to record highs and I was on the sidelines because I made the decision to follow his advice. I could have easily doubled my money in two months and got out. I'm not saying he doesn't know what he's talking about but he tends to favor the negative possibilities.

[@hkkhgffh3613]

Is he allowed to invest in interest paying assets?

[@cosmo1kramer]

Whats the romantic background music about

[@YuureiInu]

Maybe they will fall in love in the next episode.

[@janesmith8894]

Lol😂

[@jimclark9826]

I also like his analogy about a bad economy vs. a zombie economy. A bad econ is like a heart attack - worse in the short run but you know how to fix it. A zombie econ is like a body full of diseases which is much harder to understand and cure.

[@DipakBose-bq1vv]

He is saying what we all know.

[@michaelwray1299]

..."change is mandatory".😎💓😍🇺🇸👊

[@travisspazz1624]

She's like the American Felicity Jones!

[@AstonMartinStig]

I'm worried and scared about what he is saying but at the same time I am mesmerized by her looks. I don't know how to feel here.

[@arcbrush]

he's enchanting to listen to

[@GMastrokostas]

I love this guy

[@thecompetentman5384]

"boost asset prices" How? 45 million are out of work, demand at some point is going to fall off, and we expect companies to borrow more?

[@sammavitae114]

The Competent Man He’s talking about how the Fed is allowing companies that should now be bankrupt like cruise lines and air lines borrow money at next to zero interest. They then buy back their own stock which boosts prices on the stock market. In effect they are trying to game markets to hold off a depression. China did the same in 2015 and Japan in the nineties. Basically the market system has been replaced with corporate socialism.

[@jacobfehr5863]

All the major airlines that took money from the CARES act are prohibited from doing stock buybacks for a number of years