El-Erian: 'Short and Shallow' Recession View Could Be a Trap

“Companies, governments, households and equity investors should plan with an eye to a range of possible outcomes, with no single one dominating as a baseline. Such fluidity calls for safeguarding as much as possible against policy errors, corporate missteps and market accidents,” El-Erian wrote.

He expressed worry that the call for investors to look through a potential recession “could constitute a repeat of the analytical and behavioral traps that featured in last year’s ill-fated inflation call and whose consequences we are yet to put behind us.”

El-Erian sees the recession risk as “uncomfortably high” but doesn’t consider one to be certain, and he said he wasn’t predicting how serious one might be. “Rather, I am writing to warn about the traps that undermine the latest consensus forecast,” he said.