The financial markets want predictability – in the economy, the political system and beyond.
“The emergence of these nontraditional parties, the anti-establishment parties, adds to uncertainty,” said Mohammed El-Erian, chief economic advisor at Allianz, speaking Thursday on CNBC about Donald Trump, the movement in Britain to leave the EU and political changes in other parts of Europe.
“Markets in the U.S. haven’t priced that yet. It is a new phenomenon,” El-Erian said. “It hasn’t been priced in yet, but I think that there is an uncertainty premium that is going to come from the political side.”
While stressing that his is not a political analyst, the economist says the markets do now know what or how to interpret the rise of Trump.
“I think the hardest thing for the markets to assess — and that is why you don’t see the premium — is, how do you have a front-runner that doesn’t have the backing of his party?” asked El-Erian.
Still, he states, the U.S. economy continues to show that it can “overcome two headwinds — one, from weaker global growth, and two, from financial instability, [which] we have had recently.”
With the jobs report issued Friday, “I expect we will see a relatively robust labor report for both wages and employment creation,” he said.