I like Mohammed El-Arian. I also like the way he points to alternatives.
https://www.nytimes.com/2026/09/17/opinion/us-economy-treasury-stable.html
There Are Three Paths for the Economy. Only One Is Good.
By Mohamed A. El-Erian, The New York Times, Sept. 17, 2026
…
Right now, I find myself in the unsettling position of holding not one, but three distinct characterizations of the future of the U.S. economy. Each carries different implications for politicians and policy, for corporations, and for you as an investor. But together, they suggest that we must be prepared to navigate an in-between economic existence for the next few years…
This America is a picture of stable equilibrium, in which powerful forces allow the economy to bend without breaking, then revert to the mean — back to where we started. Each shock has had only temporary and reversible effects. This deep consensus, held by Wall Street in particular, explains why investors have been eager to “fade the shocks,” and why wealth managers overwhelmingly advise remaining fully invested in equities and bonds…
The second view of the economy is less rosy. It focuses on a cluster of numbers that have been heading in a disruptive direction…In this more unstable version of the economy, investors would be wise to rotate out of weaker assets such as high-yield bonds and into companies with rock-solid balance sheets, pricing power and good management…
The third version of the economy peers through a secular, structural lens and sees that, rather than being in an equilibrium, our economy is in a profound transition from a familiar past to a future that is still not well defined. If you see the economy this way, you might argue for market caution, reducing equity and bond exposures in favor of cash. … That instability is a mere feature for the third view, in which the prior world of globalization is splintering…a sped-up Industrial Revolution combined with the cognitive leaps of the Enlightenment. … An “invention of a method of invention,” such as A.I., is an engine of discovery that opens entirely unimagined areas of exploration…[end quote]
John Mauldin has long predicted a long period of “muddle through” as the U.S. and world economies deal with enormous debts and demographic imbalances. This is most similar to El-Arian’s second scenario, which is less rosy than the first but still fairly predictable.
El-Arian’s third scenario is a paradigm shift where the first two are continuations of well-known patterns. The previous Industrial Revolutions of steam, hydrocarbon power and the internet dramatically changed the economy, causing wild stock market gyrations along the way. It’s still too early to tell how profoundly AI will change the economy…and how the stock market will react to huge early-phase investments during the inevitable future shake-out.
The risk to investors is that Wall Street is investing like Scenario 1 while the real economy is in Scenario 2 which is unbalanced and not mean-reverting. Not to mention rushing into Scenario 3 which is following several earlier tech booms by overspending on early infrastructure when the real productivity benefits won’t occur for many years.
Wendy
