Investors have been bullish for some time on areas in which central banks have opened the liquidity spigot. But Mohamed El-Erian says it’s time to focus on other opportunities, including tech start-ups and private equity.
“We are coming from a period in which liquidity has been the major driver of asset prices,” El-Erian told CNBC’s “Squawk on the Street.” “What the market is telling you today is, ‘You know what? That is no longer sufficient to maintain prices at a high level.’ You need something more, and that something more is fundamentals.”
El-Erian recommends reallocating some funds to cash, to provide options during corrections, and some to higher risk and less liquid opportunities. “Don’t give up on some really exciting opportunities that are happening in the start-up world, in the private equity world,” he said. “There’s a lot going on, especially in tech.”
El-Erian says tech companies are disrupting sectors like finance and media. “They’re disrupting because their core competencies are coming from outside the sector that they are disrupting, and that is a very powerful investment theme,” he said.