It's getting very confusing,said Mohamed El-Erian,CEO and co-CIO of PIMCO.What you're having at the Fed fundamentally is,difficult decision-making in uncertainty and changing leadership.1.Not a really good feel for the economy 2.Trying to get the market focused on the journey,but the market is focused on the destination.Put on top of that the change in leadership.*
It's really important to act on what you know for sure.1.You know they can't hike rates;the economy just isn't strong enough.2.You don't know about tapering,and we're stuck in a low level growth equilibrium of 2%,and high unemployment with low inflation.We don't see the demand for the high liqiudity.The transmission mechanism is blocked.*
Look for the safest fixed income,the front end of the curve,up to five years.On the equity side,companies that will continue to take cash out and distribute through dividends and buybacks.*
Our assumption is,Congress will not create yet another self-manufactured crisis,Mr.El-Erian added.He is a long time associate of PIMCO founder Bill Gross,"the Bond King,"and formerly managed the Harvard endowment.