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[Suresh]

Bloomberg: El-Erian Says Retreat in Stocks Will Worsen as Economy Slumps
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Investors have wrongly priced in an “orderly” withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, [Mohamed A. El-Erian] the chief executive officer of Pacific Investment Management Co. wrote in a Bloomberg News column. That means Wall Street projections for gains in 2010 may prove incorrect and prices will slump, he said.

“Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes,” El-Erian, 51, wrote. “The global financial crisis has undermined growth and job creation; it has clogged many of the pipes that allocate funds to productive uses; and it has rapidly taken public debt and the budget deficit to worrisome levels.”
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El-Erian wrote that too many market participants assume the U.S. will pass “pro-growth medium-term fiscal adjustment programs” and that the integrity of public institutions will be maintained.

“A more realistic assessment of these factors would caution against an excessive focus on changes in growth rates at a time when absolute levels are horribly out of whack,” he wrote. “The longer this is delayed, the greater the scope for policy mishaps and market disappointments.”
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Suresh

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