Pimco is expecting Friday's jobs numbers to be weaker than expected, evidence of a slowing economy.
"Our strategy is based on a lackluster recovery. So we are assuming it will be a lackluster economy, Pimco CEO Mohamed El-Erian told CNBC's Closing Bell on Monday.
Jobs and economic data in the U.S. have been been weakening, "and that’s a problem," he told CNBC during the annual Milken Institute Global Conference. "The last thing we need is a repeat of 2008, 2009, 2010 where the year starts strong" and then declines.
The Federal Reserve "is going to have to do more, not because it wants to but because it has to" stimulate the U.S. economy, he predicted. That stimulus will come either as more Treasury purchases or some variant of its Operation Twist. He sees recessionin Europe, even in Germany.
"Germany will be the bright spot but even Germany will face headwinds," he said, so investors have to be careful when it comes to investing in sovereign debt .
"It's better not to expose yourself because there's a chance of getting another haircut," he added, referring to investors who face losses on their sovereign debt holdings, as was the case in Greece.
Pimco, with $1.8 trillion in assets under management, is telling U.S. clients to invest based on fundamentals — put your money in companies with a lot of cash and strong balance sheets.
"The Fed should be the cherry atop the sundae and not the sundae itself," he said.