The challenges that the current economic environment is throwing at investors and consumers are affecting the United States, other developed countries and emerging markets differently, but all are facing supply chain challenges, energy challenges, growth challenges and debt challenges.
Investors are uncomfortable right now, and advisors can add value to their service by communicating that it is understandable to feel uncomfortable, El-Erian said. A lot of attention is being paid to the biggest economic “fire”—Ukraine and Russia. But there are many other smaller fires burning around the world geopolitically and economically that need attention, he said.
For instance, China’s crackdown to fight Covid-19 is creating more supply-chain problems. El-Erian predicted another wave of supply-chain issues will sweep the world before the disruptions work themselves out in what may take up to three years.
Looking at the situation from another angle, the economy is being disrupted because real wages have decreased because of inflation. “Eventually, wages will go up and companies will have to decide” how to respond, he added.
Walther asked what investors need to have in order to weather the current disruptions.
One thing was resiliency, El-Erian said, because some policy and investment mistakes are going to be made. Also investors need to pay attention to the Federal Reserve Board and other policy makers’ activity. And finally, investors need agility, because opportunities will still be available.