Mohamed A. El-Erian Re-poster

While recent economic reports from Japan and Europe have been encouraging, the latest figures out of the United States fell short of expectations in two key areas.

First, the Gross Domestic Product for Q4 expanded at an annualized rate of just 1.4%. This represents a significant decline from the 4.4% growth seen in Q3 and misses the consensus prediction of 2.8% by a notable margin. As a result, the growth rate for the full year of 2025 sits at 2.2%, a decrease from the 2.8% achieved in 2024. Analysts will likely scrutinize the weak data surrounding government impulse and personal consumption, while political discussions are expected to revolve around the consequences of the recent government shutdown.

Second, inflation remains sticky. Core PCE, the preferred measure for the Fed, climbed 0.4% for the month. This increase drives the annual rate to 3.0%, which is hotter than the consensus estimate of 2.9%.

#economy #growth #inflation #markets

According to Bloomberg. #economy #markets #centralbanks

It has been a bright start to the day for advanced economies, with five separate data releases performing better than expected.

Starting in Asia, Japan saw headline inflation for January slow to 1.5%, a figure that was softer than anticipated. Notably, this represents the first instance in nearly four years where the rate has dipped beneath the target set by the central bank.

In Europe, the Eurozone PMI outperformed consensus forecasts. This achievement was driven by a significant turnaround in Germany, where the manufacturing sector entered expansion territory for the first time in almost four years.

Meanwhile, the UK delivered a trio of strong updates. January saw the largest budget surplus on record, thanks to a combination of lower debt-service payments and rising tax revenues. This financial boost provides the government with substantial headroom within its fiscal rules, offering valuable flexibility for the final quarter of the fiscal year.

Further strengthening the British outlook, the January PMI increased to 53.9. This result topped the consensus prediction of 53.2 and stands as the strongest reading in nearly two years. Finally, retail sales in the UK surged by 1.8% in January, shattering the forecasted 0.2% rise. This marks the fastest pace of growth for the sector in almost two years.

#economy #markets #Japan #UK #Germany #Europe

According to the @FT, shares of leading private investment managers on Wall Street fell on Thursday. This market reaction occurred after Blue Owl permanently restricted investors from exiting a debt fund meant for retail clients, causing concern across the industry.
#markets #privatecredit #blueowl #investing #investors

Emily Peck of Axios highlights new statistics derived from ADP data that align with other, though not entirely universal, signs of a softening workforce landscape. The report indicates that the substantial pay raises previously associated with changing jobs have decreased to their lowest point since 2020. In terms of specific figures, the median wage growth for employees who stayed with their current companies rose by 4.5% over the past year. Conversely, the increase for workers jumping to new employers was recorded at 6.4%. #econmy #jobs #employment #umeployment

An interesting trend in the US labor market was recently spotlighted by @Axios. Reporting on figures from ADP, Axios journalist Emily Peck reveals that the era of substantial pay raises for those changing jobs is fading. In fact, job-hoppers are currently experiencing the smallest salary gains since 2020.

A look at the specific data shows that while median pay grew by 4.5% over the last year for employees who remained with their companies, the increase for those switching roles was 6.4%. This narrowing difference aligns with various other signs that the labor market is softening, even if not every indicator agrees.

#econmy #jobs #employment #umeployment

Here is some additional insight regarding the correlation between stocks and bonds, courtesy of the IMF. The organization highlights that following the onset of the pandemic, fixed income assets have become less reliable for softening volatility within equity markets. Rather than acting as a counterweight to the risks associated with stocks, bonds are frequently trending in the same direction. This synchronization becomes especially evident during periods of intense market liquidation.

I would add that the significant spike in positive correlation, which compromises the classic efficacy of diversifying portfolios with stocks and bonds, has seen a partial reversal during the most recent timeframe. Even with this adjustment, however, the historical negative correlation is still uncharacteristically frail.

#economy #markets #portfoliodiversification #investing #investors @IMFNews

According to the IMF, the framework powering the world's second-largest economy is meeting with rising obstacles. Local demand has remained quiet, a trend primarily caused by the extended downturn in real estate and a frail social safety net, both of which have dampened the public's desire to spend. These conditions have led to deflationary stress and a heavier reliance on demand from abroad. However, simply banking on greater exports will not be enough to secure lasting growth for China in the future. #economy @IMFNews #China #growth

For those watching the high-frequency US data:
A dual beat in this morning's data as both initial jobless claims and the Philly Fed manufacturing index (below) were stronger than the consensus forecasts.
#economy #markets #growth #jobs

I am circling back to the news regarding Blue Owl that I discussed in my previous update. Please take a moment to review this chart published by the Financial Times.

#economy #markets #blueowl #privatecredit @FT

As policymakers and investors digest the recent report from the FT, a pressing question arises: is this situation reminiscent of August 2007? The Financial Times has noted that the private credit group Blue Owl will permanently restrict investors from withdrawing their cash from its inaugural private retail debt fund. This development naturally prompts a "canary-in-the-coalmine" concern.

There is much to consider regarding this news. Primarily, one must ask if this investment phenomenon in advanced markets—as opposed to developing ones—has exceeded reasonable limits. The concise response is yes. Furthermore, while specific firms utilize different strategies, the sector remains vulnerable to the "market for lemons" risk. Addressing the "elephant in the room" concerning wider systemic dangers, it is important to clarify that current risks do not near the magnitude of those behind the 2008 Global Financial Crisis. Nevertheless, a meaningful and inevitable hit to valuations is approaching for specific assets.

I will share additional thoughts on this shortly.
#economy #markets #privatecredit @FT #BlueOwl

Policymakers and investors are undoubtedly evaluating the latest updates from the FT, which notes that private credit group Blue Owl will permanently restrict investors from withdrawing their cash from its inaugural private retail debt. This development naturally prompts the question of whether we are facing a warning sign comparable to August 2007. There is much to digest here, beginning with the likelihood that this investment phenomenon has overextended itself within advanced markets, though not in developing ones. To answer briefly: yes, it has. Furthermore, while specific firms display considerable variance in their strategies, the sector is still exposed to the market for lemons risk. We must also address the major lingering concern regarding wider systemic exposure. Although the current landscape is nowhere near the severity of the triggers for the 2008 Global Financial Crisis, we should anticipate a substantial and requisite drop in valuation for specific assets. I will provide further analysis on this subject.
#economy #markets #privatecredit @FT #BlueOwl

The recently published minutes from the Federal Reserve—accessible via the link below—highlight an unusually broad spectrum of opinions within the central bank's primary policymaking committee. The document utilizes a wide array of qualifiers, including “a few,” “some,” “a number,” “several,” “most,” and “the vast majority,” to characterize these diverging viewpoints.

Another term likely to garner significant interest is “two-sided.” In this context, “several participants” expressed that they would have favored including language regarding potential rate hikes, specifically if inflation persists at levels above the target.

In summary, the FOMC appears notably and increasingly divided. This split mirrors both the intricacies of the present economic environment and the "lame duck" standing of the outgoing Chair.

https://t.co/8W33jck1Ed
#economy #markets #federalreserve #inflation #jobs

Ahead of Friday’s release of the US Q4 GDP estimate, the chart below tracks the evolution of the Atlanta Fed’s GDPNow estimate for Q-4 growth (currently 3.7%) over the past three months, including relative to the "Blue Chip" consensus.
While on growth, US industrial production in January was notably strong—expanding by 0.7%, outpacing the consensus forecast of 0.4%.
#economy #growth #gdp #markets

Prospects for the Bank of England to restart interest rate cuts next month have strengthened significantly following the latest economic reports. The newly published UK inflation statistics generally align with consensus forecasts and paint a picture of widespread cooling prices.

For January, the headline annual rate dipped to 3.0%, a notable decrease from the 3.4% recorded in December and the lowest level reached since March 2025. Similarly, core inflation slowed to 3.3% from the previous 3.5%. This downward shift was visible across various categories, with goods inflation dropping to 1.6% from 2.2%, while the services sector declined slightly to 4.3% from 4.5%.

These updates follow yesterday's news regarding softer wage data and higher-than-expected unemployment figures. When viewed together, this collection of data reinforces expectations for policy adjustments in the coming month.

#economy #inflation #uk #markets

It was a pleasure joining @carlquintanilla, @davidfaber, and @seemacnbc for a discussion earlier today. I am very grateful for the opportunity to be part of the broadcast. You can watch a segment from the interview at the following link.

https://www.cnbc.com/video/2026/02/17/expect-a-lot-of-volatility-as-we-go-forward-says-allianzs-mohamed-el-erian.html
#economy #markets #AI @cnbc @SquawkStreet

Fresh statistics published earlier today reveal that the unemployment rate in Britain has risen to 5.2%. This figure exceeds the consensus forecast, which had anticipated a rate of 5.1%. A particularly worrying trend is the rise in joblessness among those aged 18 to 24, which has now reached 14%. These latest reports add further strain to a government facing existing difficulties. Conversely, this news offers a compelling reason for the @bankofengland to consider lowering rates. Supporting this potential policy shift is the observed decline in private-sector wage growth, which has dropped to 3.4%.

#economy #uk #jobs #employment #unemployment #wages

The Conundrum of US Bond Rates

We are currently witnessing some confusing behavior from the 10-year US government bond. After falling to a low of 4.01% earlier this morning, the yield is presently sitting near 4.03%. This specific level appears to be completely out of sync with both established valuations and the underlying economic fundamentals.

When looking at the fundamental picture, there is a distinct clash of data. On one hand, the headline inflation figures released last week were softer than anticipated, which would usually suggest lower yields. However, this is counterbalanced by a significant list of factors that typically drive yields higher. These include the strong GDP growth, the beat on job numbers recorded in January, substantial deficits, increasing oil prices, and a decline in the resilience of foreign demand.

Furthermore, standard valuation models find it difficult to provide a rationale for a yield of 4%. As a result, it seems that technical considerations have taken control of the market, even if the precise details regarding those factors are difficult to pinpoint right now.

I would value hearing your perspective on this situation.

#economy #markets #growth #inflation #bonds

Referring back to a previous update, I wanted to share my perspective on how the United States is currently facing a unique situation regarding jobless growth. It appears that the gap widening between economic expansion and employment figures is becoming more durable and carries greater weight than what we experienced during the three earlier occurrences spanning the last 40 years. This shift suggests we are stepping into a landscape that has not yet been mapped. You can access the full commentary via the link below.

https://t.co/J6ReAtOCpc
#economy #jobs #employment #unemployment #growth #markets @FT

In the context of our current discussion, please review the top 25 MBA programs featured in the FT global ranking. #businessschools #mba @FT