Finally, with the corporate sector more exposed, the stock markets will remain vulnerable to global economic weakness, opening up the possibility of a negative wealth effect if holders of stocks feel less well-off and cut back on their spending.

Last week’s reaction to the yield curve inversion was overblown. Yet it included an important warning to politicians around the world. Unless they step up their pro-growth policy initiatives, the risks of major economic and financial disruptions are increasing. And with lower interest rates on longer-term debt, what a great time to initiate infrastructure programs in both Europe and the US that can help crowd in private sector investment, enhance supply responsiveness and boost demand in a more sustainable fashion.

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."

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