Mohamed A. El-Erian , Columnist

Policy Makers Start to Find Their Footing in Virus Response

The markets are responding favorably but need sustained evidence of a comprehensive effort.

March 13, 2020 at 2:41 PM 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.”

Short- or long-term bounce?
Photographer: Alex Kraus/Bloomberg

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U.S. financial markets, roiled on Thursday by the second-largest daily stock drop in history in percentage terms, opened higher on Friday after policy makers finally reacted more forcefully to the unprecedented dangers that the coronavirus poses to economic prosperity and financial stability. To sustain that rebound in the immediate term, deep-pocketed buyers must commit in a big way and overwhelm trapped longs and forced sellers. More important for the longer-term, they need to believe that this response is part of comprehensive plans that form a critical mass to overcome not just what is likely to be a global recession but also an inherent contradiction between the current phase of the health response and the wiring of a modern market-based economy.

Policy makers, who underestimated the cascading economic sudden stops and then responded and communicated ineffectively at first, are finally establishing the foundation for a comprehensive and effective monetary and fiscal response.