Mohamed A. El-Erian , Columnist

Markets Are Propelled by What Hasn’t Happened

The economy hasn’t contracted, the labor market hasn’t collapsed, and bank disruptions haven’t upended the financial system. Traders are relieved.

July 17, 2023 at 9:00 AM UTC

By Mohamed A. El-Erian

Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief executive officer of Pimco, he is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy Fund Management. He is author of “The Only Game in Town.”

The economic narrative is an ideal one for markets, supporting both risky and risk-free assets.
Photographer: Michael M. Santiago/Getty Images

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Whether you are examining the evolution of the US economy or the impact of monetary policy, one of the noteworthy developments this year is not what has happened but rather what has not. We were reminded of this over the last two weeks by macroeconomic data and by quarterly bank earnings. It is a phenomenon that, crucially for markets, has meant that interest-rate risk has not translated into any material credit risk — a relief that traders and investors are happy to run with despite residual uncertainty.

Consider some examples that reflect this general theme of what has not occurred: