3 Factors Driving Stocks Higher And 2 Headwinds That Could Depress Stocks

Mohamed El-Erian, Allianz's chief economic adviser, was a guest on CNBC's "Squawk Box" segment on Tuesday and discussed three factors are moving stocks higher and two factors that could put a dent in the ongoing rally.

El-Erian argued that the three factors boosting stock markets higher across the globe include:

1. Better economic data.
2. Cash sitting on the sidelines continues to be put back into the equity markets as investors are finding M&A activity, dividends and share buybacks a bullish signal.
3. Expectations that President Donald Trump's pro-growth ideas will be converted into actual policy.

Warning Signs

Despite the three strong indicators that suggest continued strength in the stock market, El-Erian cautioned investors there are two important factors that could derail the stock market's momentum.

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First, the economist argued the strengthening of the U.S. dollar poses a set of problems for investors if the domestic economy outperforms in the international stage — which El-Erian believes it will. Moreover, additional interest rate hikes will create further headwinds throughout the year.

Second, investors are anxiously awaiting the U.S. Congress' moves forward on some of Trump's pro-growth ideas, including tax reform, deregulation and infrastructure spending.