9. What appears to be shaken market confidence in the many beneficial consequences of a durable synchronized pickup in global growth has been amplified by the materialization of some issues (such as higher yields, dollar appreciation and protectionist measures) that failed to appear last year.
10. This has naturally dampened a seemingly overwhelming investor conditioning to buy the dip, regardless of its causes, accentuating asset price volatility and making the market gyrations more pronounced and less unidirectional over the longer-term.
As long as global growth continues to rise in a sustainable and more inclusive fashion, sounder fundamentals would help anchor the long-awaited market transition away from liquidity support and toward stronger economic and corporate underpinnings. And while this would carry the hope of a sounder medium-term footing for markets, it does not imply a return to the abnormally low volatility of last year.
The two-way price volatility of recent weeks, which was in sharp contrast to the relatively long period of calm that preceded it, is a better indication of what lies ahead. Fortunately, there are observable market-based variables that can be monitored on a high-frequency basis to shed light on the probability of success.
Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE and chairman of the President’s Global Development Council, and he was chief executive and co-chief investment officer of Pimco.
This column was provided by Bloomberg News.