Major price realignments in crude oil and currencies that are "consequential and durable" will be key in 2015, Mohamed El-Erian, chief economic adviser of financial services giant Allianz, told CNBC's "Squawk Box" on Wednesday morning.
"Put these two things together and they threaten the low-volatility paradigm that markets have enjoyed and that central banks have delivered," he said.
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The plunge in oil price reflects a fundamental shift in supply, with no one playing the roll of the swing producer, he said. The absence of an actor that can balance out prices will have major consequences, he added.
The realignment in currency dovetails with increasing divergence in economic performance and monetary policy in countries around the world, he said.
The Federal Reserve is widely expected to allow interest rates to rise this year. Meanwhile, investors anticipate the European Central Bank will drive down rates by buying sovereign debt. Japan has also launched economic stimulus measures.
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The realignment of prices and subsequent end of low volatility does not mean everything will fall apart, but markets do face a tipping point, El-Erian said.
"Either we tip to genuine growth and central banks being able to cope with this change in the global paradigm, or we tip to something worse, and I think the probabilities are pretty equal right now," he said.
"What I feel strongly about is we're not going to be able to maintain for one or two more years this low-volatility paradigm where central banks repress major prices," he added.
Asked about comments from his former Pimco colleague Bill Gross that the good times have passed, he said that is one possible outcome.
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The other outcome is investors see a pivot to stronger fundamentals, which would not only validate existing prices but push them higher, he said.
The U.S. 10-year Treasury yield could be governed by international development, as European yields collapse due to weakness in the euro zone, the threat of a Greek exit from the EU, and the expectation that the European Central Bank will begin buying sovereign debt, he said. Once the spread between German bunds and U.S. bonds moves above 150 basis points, the U.S. 10-year starts moving, he noted.
El-Erian worries that investors will question whether central banks can continuously repress market volatility as economic performance and monetary policy in the United States, Europe and Japan diverge.
In that scenario, investment in the U.S. has many advantages, including a better economy, a healthier financial system and less geopolitical exposure to Russia and the Middle East. However valuations of U.S. equities have moved a lot, he said.
"On a stand-alone basis, the U.S. absolutely dominates, but markets have priced that in already."