"We should respect the QE trade," he said. "I don't think it's the QE trade of the old type—which is the generalized compression in all the risk spread and risk premium, that's gone, so I don't think it's a beta trade—I think it's much more a relative trade."
The star economist also reiterated his expectations that the Fed will move to raise interest rates by September—or perhaps even in June.
"They would move for two reasons ... the economy is improving, the labor market is healing, and there is a good genuine debate as to how close are we to the natural rate of unemployment," El-Erian said. "The second is they're uncomfortable being at zero."
Read MoreEl Erian: Expect a Fed rate hike by September
He explained that despite the zero interest rate policy lasting for several years, the Fed now has enough reasons to move, that it can act on its discomfort. Those worries, he said, are based on what the policy may be doing to resource allocation, and that the markets may be coming to consider zero as "normal."
El-Erian said he expects the central bank to strengthen forward guidance to make sure that investors are focused on a "gradual journey" of rate increases.
"Yes, they start moving, but they start moving in a very qualified manner," he said.