The rallying market has ignored Muhammad El-Erian’s previous “sugar high” comments, and it seems even better-than-expected August payrolls data wasn’t enough to make him budge.
Essentially, El-Erian argues that while the payrolls data improved (was less negative), it was still negative, thus a sustained recovery is far off. But he is taken to task in a somewhat heated exchange in the video below, starting at 1:20.
- El Erian, 1:20: “These are worrisome numbers, because without credit, employment and wages are key to economic recovery. Empoyment is still a headwind and not a tailwind.”
- Taking El-Erian to task, 2:30: “It would be quite unlikely, and in fact it would have been unprecedented, to go from -450 in the second quarter to job growth in the third, but if you look at the trajectory then I think it looked as well as it could.”
We think where Mr. El-Erian has been wrong so far is in missing the fact that where a market goes has a lot to do with where it is coming from. And historically, this market is still well off its highs, and still below where it was last September. Thus such a market doesn’t need “great” news. It just needs “better” news.
Latest payrolls data was exactly that, better.