“As much as I would like to say the volatility is behind us, I expect that the volatility will return in the weeks ahead,” Allianz’s chief economic advisor told CNBC’s “Closing Bell.”
The S&P 500 has fallen more than 6 percent this year, while the CBOE Volatility Index has climbed nearly 13 percent. However, stocks ended Friday with their best week of the year, as major US averages rose more than 2.5 percent each.
Speculation has surrounded whether global developments and market weakness could force the Federal Reserve to slow its interest rate-hiking path. So far, the US central bank has signaled it will still tighten slowly, though top policymakers have acknowledged they are watching trends abroad.
“If the Fed was making the decision based on the US as a stand-alone, it would continue to normalize very carefully and very slowly,” El-Erian said.
He contended that the Fed “still seems inclined to hike this year” as long as financial trends around the world do not lead to “contamination” in the US