A well-known global economist said, Mohammed Al-ArianInvesting in the stock markets certainly has value in some very attractive individual names, but you can’t avoid the macro factors influencing the markets right now.
Al-Arian added, in an interview with “CNBC” last Friday, that individual names should be avoided at the present time, because everyone is affected in a large way by what happens in the market, although some of them carry great future value.
In a related context, Al-Arian told CNN that interest rates that rise faster and last for a longer period, as well as the high risk of an economic recession, could have been avoided if the Federal Reserve had acted early to curb inflation.
His comments came after the Federal Reserve on Wednesday raised interest rates by 0.75 percentage points for the third time in a row to counter rising prices in US markets, as higher interest rates discourage borrowing, thus lulling demand across the economy, but the move risks slowing. growth to the point that the economy may slip into recession.
“The high risks of recession could have been avoided if the Fed had responded in time to calm inflation,” El-Erian wrote in a tweet on Twitter after the Fed rate decision was announced.
The Federal Reserve has already raised interest rates five times this year, with larger increases occurring at a faster pace over recent months, as the bank races to rein in inflation, which reached a 40-year high of 9.1% last June, while inflation has subsided in months. next, but remained up at 8.3% last August.
“Instead of leading the markets in the fight against inflation, the Fed had to follow it,” El-Erian wrote in a separate CNN op-ed published on Wednesday ahead of the central bank’s rate announcement. It will head strongly towards the weak domestic and global economy.”
El-Erian added that the situation has caused a lot of confidence to be lost in the central bank, and there is a risk that politicians, businesses and families may view the Fed as “part of the problem rather than part of the solution.”
“A growing number of economists are warning that the Fed will push the US into recession; a growing number of foreign policymakers are complaining that the world’s strongest and most systemically important central bank is pulling the rug out from under an already fragile global economy,” El-Erian said. .
Jerome Powell, the current chair of the Federal Reserve, admitted at a congressional hearing in March that the central bank should have acted earlier.
“Hindsight says we should have acted sooner, as supply-side recovery is taking much longer than we thought,” Powell said. Powell warned last month that slowing inflation would “bring some pain to households and businesses”.
It is noteworthy that El-Erian is a senior advisor to Allianz and President of Queen’s College at Cambridge University in Britain, and previously served as CEO of the giant “Pimco” company that specializes in US bond funds.