The 4% decline in the Dow Jones Industrial Average in January could portend worse things to come for the stock market and the economy, Mohamed A. El-Erian, co-chief investment officer of PIMCO, recently wrote in a Bloomberg News column.

The stock market has overpriced an “orderly” withdrawal of stimulus money, the government’s success in restoring growth, and a rebound in bank lending, jobs, consumer spending and the role of the U.S. in the global economy, El-Erian said.

“Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes,” he 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.

“Judging from market valuations, I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” El-Erian said.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.