depend on the policy responses in the systemically important economies in Asia, Europe and North America.
7. A constructive policy response would require a transition from the excessive reliance on central banks to a set of policies that reinvigorates growth engines, deals with aggregate demand imbalances, addresses excessive pockets of indebtedness and makes progress in completing regional and global economic/financial architectures (which also would counter the rise of political extremes on both sides of the Atlantic). If this approach were successful, range-bound trading would yield to genuinely higher financial asset prices that are firmly supported by strengthening fundamentals.
8. But the more this policy handoff is delayed, and the greater the political polarization, the higher the probability of notably lower markets that, in turn, would risk contaminating economic fundamentals and making the politics even messier.
Mohamed El-Erian is chief economic advisor at Allianz SE.