Investors keep a keen eye on economic data to get an idea of where the economy stands. The problem is that it's backward looking. So what should they do to find out where it's going? Listen to earnings calls says Allianz Chief Economic Advisor Mohamed El-Erian.

By listening to these quarterly updates from businesses, El-Erian says "you can start putting an image together" of what these companies are seeing. "Companies are at the forefront. They have a much better sense of what's going on on the ground at turning points. And this could be a turning point. So, listen carefully to what companies are telling us," he adds.

Click here to watch the full interview or you can watch this full episode of Yahoo Finance Live here.

Editor's note: This article was written by Stephanie Mikulich.

Video Transcript

- In terms of forward-looking indicators, what is your-- what are you looking at in terms of what's giving you the best indication of where the economy is headed?

MOHAMED EL-ARIAN: Earnings call. I listened really carefully to earnings call. You can start putting an image together by listening to different earnings calls and what they're telling you about what they are seeing.

Companies are at the forefront. And they have a much better sense of what's going on the ground at turning points. And this could be a turning point.

So listen carefully to what companies are telling us. This is the reason why a lot of people missed the inflation call calling it transitory. They weren't listening to the companies.

The companies were making it very clear back in 2021 that costs were going up. And they felt confident they could pass it on. And companies were telling us that they have pricing power and they were going to raise prices. But people somehow dismissed it from a macro perspective as transitory.

Listen to companies. They also indicated to us why we didn't fall into recession. 14 months ago, most people were thinking the US was going to fall into recession.

The companies were saying our businesses are strong. So in order of forward-looking, nothing beats what companies tell you.

- Does that mean that companies, as well as investors have been overexuberant on the other side for cuts here?

MOHAMED EL-ARIAN: Oh, I mean, I remember and I was talking to Julie about it at the end of last year, the market was pricing in 6 to 7 cuts starting in March. And I remember thinking, what are the markets seeing that is not there?

Yes, we got overexuberance. November, December was a period of incredible exuberance. We made money as investors on both our stocks and our bonds.

We fully embrace the soft landing. And we went too far. Now, the fixed income market has adjusted.

Fixed income has delivered negative returns this year so far. So you've had the adjustment on the fixed income side. And fortunately, because the economy has been so strong, it has not come at the cost of equities.

So equities are having a decent year, even though rates have moved up. And that just shows you the strength of the US economy.