Stock Recovery Will Come Last: Pimco's El-Erian

Stocks will be the last asset class to recover from the financial turmoil and investors should aim for high-quality investments in the meantime, Pimco Co-CEO Mohamed El-Erian said Wednesday.

In addition, investors should stop trying call the end of the crisis and focus on being positioned for the next evolution of the financial upheaval, El-Erian told CNBC's "Squawk Box Europe."

"First (in the recovery) is unclogging the pipes of the system, healing the commercial paper market, healing money markets, getting people to lend, and that's going to happen over the next few months," he said. "Then slow sequential healing."

"This is not the time to buy risk assets," El-Erian said.

(Watch the first section of El-Erian's interview above, the second section here >>>, and the third section here >>>).

"At Pimco the simple image is we are in a storm and not only want to be under the umbrella, but at the handle of the umbrella, in high-quality investments," he added. "Being under the umbrella is not enough, as you will get splashed. You want to be at the handle of the umbrella."

Watch How It Morphs

Everyone is trying to call and end to the financial crisis, but "what one should be doing is understanding the way the crisis morphs," El-Erian said.

"This is not a crisis within the system, this is a crisis of the system," he said. "We are probably three quarters of the way over, the next stage is the policy response and what investors have to keep an eye on is how it morphs and (they should) make sure they stay ahead of how it's morphing."

As for policy response, the markets want actions yesterday, but policy makers can only deliver in a few months time, he said.

The mindset of governments was summed up very well by UK Prime Minister Gordon Brown, who said the government will do whatever it takes not because they want to, but because the alternative is much worse, he added.