Given Mohamed El-Erian’s prescience on inflation, investors may want to hear what he says about the stock market.

“If I’m investing over the next 12-month horizon, I would reduce equities at this point. I would take some money off the table,” the bond market veteran told Bloomberg TV’s The Open on Tuesday. “The market is giving you a wonderful opportunity to come out.”

“I don’t think the market has factored in yet what’s going to happen to the economy,” he said.

In a Bloomberg Opinion column on Tuesday, the former chief executive officer of Pacific Investment Management Co. wrote how a recent swing toward tighter monetary policy after months of letting U.S. inflation accelerate to the highest since the 1980s has put the Fed in a terrible position. “The Fed is increasingly being forced to consider what is the least bad policy mistake it wishes to be remembered for: meeting its inflation target by causing a recession, or allowing high and potentially destabilizing inflation to persist well into 2023,” El-Erian wrote.

El-Erian said in the television interview that he’s not surprised that stocks have proven resilient, rising since the Fed last week raised overnight lending rates for the first time since 2018.

“If you’re an asset allocator and someone comes up with the proposal that you should reduce equity, you’re going to say: ‘Where do I go?’” El-Erian said. “You go into cash? Hell, no. Inflation is 7.9% and we may touch 10%. You don’t want to go there. That’s a guaranteed negative real return. Bonds? Hell no, bonds are adjusting....You end up not reducing your allocation to equities but actually looking to increase them.”

But, he warned, the relative value of stocks may prove vulnerable. “My baseline, for what it’s worth, is we’re going to see a global stagflation, lower growth, higher inflation,” El-Erian said. “The equity market hasn’t quite priced that in yet because it’s still thinking in a relative space.”

El-Erian in July said that inflation, at the time running at a 5.4% annualized pace, wouldn’t be as transitory as the Federal Reserve was projecting at that time.

This article was provided by Bloomberg News.