Mohamed El-Erian, a renowned economist, has expressed reservations about placing his personal assets in the stock market. As a result, he's shifted away from equities amid the ongoing efforts by central banks to control inflation.
During a conversation on the FT’s Money Clinic podcast, El-Erian elaborated on his strategy. This involves diversifying more of his assets into low-risk cash and its equivalents that offer respectable interest rates. Simultaneously, he's increased his stakes in high-risk distressed debt scenarios to create a balance.
“For those wary of the stock market, much like myself, there are attractive places to allocate funds where returns of 4 to 5 per cent are achievable,” he commented, praising the benefits of prime interest-bearing cash savings accounts.
Furthermore, he pointed out lucrative prospects in distressed private credit investments among other opportunities.
His expertise as a seasoned investor allows him to employ such a strategy, but he warned it might not be appropriate for those new to investing.
El-Erian serves as the principal economic consultant for Allianz, which is affiliated with Pimco, a prominent bonds and fixed income investments firm. He previously held the position of CEO there and currently contributes to the Financial Times.
“In due course, I'll feel more at ease augmenting my equity stakes. However, for now, I remain prudent,” he remarked, alluding to the unpredictability in both stock and bond markets with the anticipation of enduring high rates.
“Gradually, as years pass, we'll transition to a more conventional phase where standard correlations and associated risk management measures will reemerge. While I can predict the end goal, the process to reach there is quite challenging.”
Considering the present scenario, he emphasized three pivotal attributes for investors: resilience, optionality, and agility.
“By resilience, it means the capacity to rectify errors. Optionality signifies an adaptive mindset, recognizing one's knowledge limitations and thinking innovatively. Agility entails swift decision-making. To clarify, these traits aren't solely pertinent to investing. It's crucial for both governmental figures and corporate leaders to introspect daily on their resilience, optionality, and agility levels,” he stated.
Additionally, El-Erian discussed the central ideas of his recently co-written book, "Permacrisis: A plan to fix a fractured world". He reminisced about his earliest financial experiences playing blackjack with his uncle in Egypt when he was merely five or six years old. “With a seemingly endless pocket compared to mine, my uncle invariably had the upper hand,” he reminisced.
