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El-Erian: Markets Convalescing to "New Normal"

The global economy and global markets are on a volatile journey to a “new normal,” according to Mohamed El-Erian, CEO and co-CIO at Pimco.

“The global economy and global markets suffered a major cardiac arrest in September, ended up in the ICU, an enormous amount of medicine was administered and now we’re seeing certain parts stabilize,” El-Erian told CNBC.

Those stabilized parts include the financial markets, the credit markets and certain banks, according to El-Erian. Certain parts of the economy, he acknowledged, are not recovering and are still under pressure.

“The patient as a whole is somewhat stabilized but far from cured, and we’re going to continue getting mixed signals,” he said. “The critical thing is to remember that when the patient comes out of the ICU, he or she will be different.”

When the economy makes a full recovery, according to El-Erian, there will be much less leverage and credit, more government intervention and more caution on the part of consumers.

“The result of that is an economy that grows less fast than it has in the past,” he added.

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