Mohamed El-Erian told CNBC on Tuesday that there was “good news across the board” on the coronavirus battle as U.S. stock surged.
Appearing on “Squawk Box,” the chief economic advisor at Allianz said he is encouraged by developments on a potential Covid-19 vaccine and the lack of a dramatic spike in new cases as states moved to reopen parts of their economies.
Real-time data showed businesses and households were reengaging in the economy, said El-Erian. “The big hope is we sustain it, and now the market place has embraced it.”
Speaking before Tuesday’s opening bell, El-Erian said he likes that the premarket action showed investors were adding risk in a widespread manner.
“It’s not just stocks. It’s other risk assets. It’s fixed income. It’s currencies, and it’s commodities,” he explained. “So it’s really good to see across the board risk-on tone, which we haven’t had really for quite a while.”
In the first trading session in a holiday-shortened week, Dow futures were indicating an opening pop of more than 600 points on Tuesday, which indeed happened.
Wall Street was responding to news from Maryland-based biotech Novavax, which said it’s starting its first human trial of its experimental Covid-19 vaccine. Shares surged over 15%.
Earlier this month, Massachusetts-based Moderna reported positive developments on its vaccine trial.
Additionally, investors were applauding that economic activity was picking up as virus-related business restrictions continue to be eased in states across America.
El-Erian said data across a variety of economic categories — from credit cards to restaurant reservations to TSA travel checkpoint numbers — all “point to engagement.”
As for infection data, El-Erian noted there is a lag between when restrictions are eased and when new cases will show up. “So far, it looks OK-ish. Some pick up in cases but nothing dramatic. But let’s keep an eye on that.”
“This is not going to be a smooth process,” he added. “There’s going to be ups and downs but keep on eye both on the health side and on the engagement side and that will give you a very good view as to where we’re going.”