PIMCO’s El-Erian: Not So Fast on Stock Investing

Investors should tread carefully when it comes to the stock markets given continuing political and economic unrest, PIMCO CEO and co-CIO Mohamed El-Erian (left) told CNBC Tuesday.

“It’s too early to declare victory,” said the PIMCO executive, emphasizing the debt crisis in Europe as well as instability in the Middle East and the need for the economy’s “cyclical bounce to translate into a secular bounce.”

El-Erian suggests that investors should carefully allocate funds, be underweight stocks at these valuations, and be overweight certain commodities, such as oil and gold. With respect to bonds, he sees those with shorter duration, i.e., a target of seven years or less, as optimal.

“You want to have selective commodities. You want to have gold and oil because of the geopolitical risk in your portfolio,” he explained. The key investing rules to follow at this time, El-Erian adds, are “prudence, patience and optionaiity.”

Still, he notes, the Federal Reserve and other banks don’t have all the answers on long-term economic stability. “Even the central bankers are beginning to announce that it is not just about the effects, it’s about the costs and risks,” he noted.