The U.S. presidential election signals a major transformation for the country, according to economist Mohamed El-Erian, who said the financial markets were reacting rationally Wednesday.
Stocks, bond yields and bitcoin all advanced following Donald Trump's presidential win and Republicans' gaining Senate control, with the Dow Jones Industrial Average surging to a record high.
"This is not just a big win for President Trump, this is not just a big win for Republicans. This is the emergence of a new power structure in the United States," El-Erian, Allianz chief economic advisor, said in an interview on BloombergTV.
"The markets are reacting in an incredibly rational fashion," he said, adding that financial markets have done much better than political scientists in recent months in predicting what could happen and in reacting to what has happened.
The fixed income market response reflects an embrace of growth resulting from the deregulation expected under a Trump administration, concern over high inflation and revisiting conventional wisdom about the Federal Reserve's interest-rate policy, he said.
"All three are playing in," El-Erian added. "Over the next few weeks and months we're going to have a better feel for which one will prevail or not."
That higher growth would be good for equities, and the Fed not having to cut rates for the "right reasons" — that the economy and employment are doing well — "that's good for equities too," he said.
