- Jason Reed/Reuters
Markets gotwhacked after the UK voted to leave the EU on Friday, with European stocks posting the worst daily drop in almost eight years.
But according to Mohamed El-Erian, the Brexit also presents some long-term investment opportunities.
“We’ll see pretty sharp movements” in the short term, he said in aninterview with CNBCon Friday. “But there will also be opportunities for those who have cash in the days and weeks ahead.”
El-Erian, Allianz’s chief economic officer, said that it was important to be cautious and “look for companies in particular with very strong balance sheets and positive cash flow.”
There are quite a few of them in technology and other sectors, he said. For now, avoid the financial sector, despite the huge drop in bank stocks – it’s just not worth the uncertainty.
“There are more questions than answers as to what happens next institutionally,” El-Erian said. “You’ve given a major shock to the institutional setup. They’re gonna have to reconnect the pipes over the next quarters.”
Ultimately, he said, he thinks that the EU will be fine – but in the short term there will be a lot of political and financial uncertainty, and Europe’s going to take an “economic hit.”
And to treat Britain with retribution would make it only worse.
“The temptation would certainly be there, in order to dissuade anybody else,” he said of the EU coming down hard and closing off trade to Britain. “But that would be a huge mistake on Europe’s behalf … The retribution way risks even more damage.”