El-Erian’s current observations:
- Thinks it is highly probable Bernanke is going to outline the options that are available to the Fed at Jackson Hole but likely won’t get specific.
- Next week he expects the markets to move one way or another because European leaders are going to have to supply some action to back up their words.
- The housing market is finally forming a much-welcome bottom.
- Housing is extremely affordable right now which supports the bottom, but we don’t want to lose Fed support for the housing market at this time.
- China is one of the big four risks to the global economy (the others being the “fiscal cliff,” Europe and geopolitics).