All of which would make the recent partial rebound in global economic growth rather fragile. Meanwhile, the U.S. would continue to benefit from a strong labor market and a relatively more closed economy. Moreover, greater relative European easing of monetary policy would support the dollar, adding to the longer-term edge for the U.S.
To reduce the risk of short-term gains giving way to renewed disappointment, investors who are increasing their international exposure would be well advised to stress quality in selecting their investment vehicles. The emphasis should be on companies with solid balance sheets, strong management teams, considerable cash-flow generation and a domestic tilt in their operations. This would allow these investors to keep a claim on the short-term upside while limiting some of the possible longer-term downside risks.
Mohamed A. El-Erian is a Bloomberg Opinion columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. He is president-elect of Queens' College, Cambridge, senior adviser at Gramercy and professor of practice at Wharton. His books include "The Only Game in Town" and "When Markets Collide."