Mohamed A. El-Erian , Columnist

We’re in Phase III of the Trump Rally

After euphoria and consolidation, the choice is between stagflation and reflation.

February 1, 2017 at 7:00 AM UTC

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.”

Mixed signals.
Photographer: Ron Sachs/Pool via Bloomberg

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The post-election movements of U.S. stocks have been heavily influenced by policy. First they soared, then they traded in a narrow range. Now the markets have entered a period of greater volatility underpinned by a tug of war between the expectation of reflationary policies and the risk of stumbling into stagflation. Where we end up will be predominantly a political call.

Phase I: Euphoric Markets
The markets’ euphoric phase started in the early morning of Nov. 9, when President-elect Donald Trump delivered his acceptance speech. It lasted until mid-December.