El-Erian: Cash Is Still King

(Market Insider) Famed economist Mohamed El-Erian is holding on to his cash to avoid the ballooning uncertainty of the stock market as it isn't clear where the next "anchor" for markets will come from. 

"I have money on the sidelines, and I missed the last rally of the last three weeks. I'm not putting it to work here," El-Erian, the chief economic adviser at Allianz told CNBC on Thursday. 

His comments came after US stocks fell sharply on Wednesday in the worst day for the stock market since June 11, as investors weighed the prospect of new coronavirus cases leading to reimposed shutdowns and slow economic recovery.

Last month, El-Erian warned that the newly bearish stock market was stuck in an odd limbo and could fall further, but those with an itch to deploy cash should spread out their payments over several months. 

The economist, who has authored a book called "When Markets Collide: Investment Strategies for the Age of Global Economic Change," said in his interview that once he is comfortable putting his money to work, he will turn to areas "under the umbrella." 

El-Erian said: "There's two types of umbrellas out there. If you are comfortable with moral hazard, the umbrella support by the Fed, which involves high-quality bonds and certain high-yield bonds.

"If you're comfortable with a market-based umbrella, it is companies with a very strong balance sheet and positive cash-flow generation. There's quite a few of them ... out there, and I suspect they will continue to do well, albeit in a very volatile fashion."

He said the big question is "what is the next anchor for markets?" and believes the volatility will persist until that is identified.


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