HOTTER THAN EXPECTED: Mohamed El-Erian on inflation: 'be careful of a Fed that is too data de...

  

Feb 15, 2024

Hotter-than-expected inflation data sent stocks reeling on Tuesday, effectively dashing investors hopes for a March rate cut. However, comments from some Federal Reserve officials has provided reassurance that cuts will come eventually. Allianz Chief Economic Advisor Mohamed El-Erian gave Yahoo Finance his three takeaways from this week's data and Fedspeak.

• He says that the path to the Fed's 2% inflation target is "not going to be smooth" and that the market had "over-embraced the notion of a very soft landing."
• The third thing he points to is the strong market reaction to the inflation data as an indicator of the depth of the market.

• Another concern for investors was the weaker-than-expected January retail sales data.

El-Erian, who also serves as President of Queens' College at the University of Cambridge, says that he hopes the data was a "blip."

If it's not, El-Erian claims that he will be more concerned about the retail sales data than the inflation data. Why?

"Because US exceptionalism has been based on the ability to continue to grow and grow powered by the household sector and powered by retail sales." It's why. EL-Erian says, the US has outperformed other economies.

Other "yellow" flashing data El-Erian is watching is what he is hearing from companies' in their quarterly reports.

• He notes that companies that have more exposure to lower-income households are seeing more softness.
• He also points to how guidance has varied strongly from company to company, meaning that "individual name selection is going to be critical... going forward."
  

Watch the video above to hear what El-Erian says about housing and why investors should "be careful of a Fed that is too data dependent."