Mohamed El-Erian: Time to reduce exposure to the public market

There is "unusual" political, financial, economic and institutional uncertainty facing the market right now, Allianz's chief economic advisor, Mohamed El-Erian, told CNBC on Wednesday.

"This is a time to reduce your exposure to the public market," he said in an interview with "Closing Bell."

That means keeping a higher level of cash than one would normally have, and being more tactical in what one would be inclined to do, he said.

It's not the first time the former Pimco CEO has urged caution amid this market uncertainty.

He also reiterated his belief that if the Federal Reserve doesn't raise rates in December, the risk for financial instability will be "high."

On Wednesday, the central bank opted to keep rates steady at its November meeting, and made no direct reference to a hike coming at its December gathering.

El-Erian believes the Fed had windows to move on rates and didn't.

"I understand why it didn't but if I had been there, I would have argued to hike at that stage," he said.

That said, "I don't think the economy has weakened that much. I think the economy remains a 1.5 to 2 percent economy."

When it comes to the election, El-Erian said if Democratic nominee Hillary Clinton wins and Republicans control Congress, then the market will take the results stride.

However, the market outcomes will be completely different if either Republican nominee Donald Trump wins and there is a reassertion of anti-trade measures or if there is a complete Democratic sweep, he added.