Amid the the blissful calm of a new record stock market high, the sharp, fleeting panic of early October can seem like a mere bad dream.

Or was it a premonition of the turmoil that awaits investors facing an unbalanced world economy with central banks pulling in different directions?

Mohamed El-Erian, chief economic advisor for Allianz and former CEO of its Pimco asset management division, fears that the spasm of volatility last month was probably a preview of jumpier times ahead.

In particular, he is concerned that the rapid moves underway in currency markets, driven by stark variations in world growth rates and monetary policies, might make their way into equity markets into next year.

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The reason the Standard & Poor’s 500 (^GSPC) tumbled 9% in a few weeks and the 10-year Treasury yield (^TNX) whooshed briefly below 2%, El-Erian says, was “because the two premises the markets had been relying on were shaken.”

Namely, the assumption that global growth would remain slow but positive – or “Goldilocks-like” – and the faith that “central banks will always be there for us,” El-Erian tells us in the attached video, recorded at the Global Financial Leadership Conference in Naples, Fla.

When growth gauges in Europe flagged and Germany reported a drop in industrial production, the first premise was thrown into doubt. And as the European Central Bank appeared “hesitant” to undertake more aggressive money creation, the second notion was undermined.

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As the selling began to accelerate, investors realized that the long period of placid markets had led to “mispriced liquidity risk” – a dangerous assumption that big traders could unwind crowded trades easily.

Then, of course, President James Bullard of the St. Louis Federal Reserve halted the selling with the mere public suggestion that the Fed might consider prolonging its QE3 bond-buying plan, a powerful signal that the central bank was closely focused on market conditions.

The powerful snapback rally since Bullard’s comments of mid-October “reinforced the notion that central banks are the markets best friends, and they will continue to do whatever it takes to limit volatility.”

Yet, this proposition is now complicated by the fast-moving opposing currents at work across the world. The Fed is seeking a chance to lift rates next year as the U.S. economy performs relatively well, while the ECB, the Bank of Japan and People’s Bank of China are going the other way, planning further easy-money interventions to stave off deflation and stoke growth.

This is behind the ferocious rally in the U.S. dollar against most other currencies.

Related: 3 Ways to play a stronger dollar

“Historically,” El-Erian says, “when you have very sharp moves in the currency [markets], something breaks.”

It used to be developing-country markets and economies that “broke,” due to their inability to stem capital flight and heavy dollar-based debts.

But today, El-Erian is less concerned about this scenario than the risk that “volatility in currency markets slowly gets translated to equity markets. Why? Because most equity investors don’t hedge their currency risk.”

This sets up the prospect that big investors could be caught unawares by unsettled asset markets and we find ourselves again learning about “mispriced liquidity risk.”

“You can have this transmission mechanism,” El-Erian says, “and if volatility comes back, then it is going to question the ability of central banks to suppress it.”

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