El-Erian: S&P Has 10% Downside, 'Roller Coaster' Coming

Allianz Chief Economic Adviser Mohamed El-Erian appeared on CNBC and said that a range-bound market could soon see more dramatic action, with potential for 10 percent downside.

"Don't be surprised if you see a 5 to 10 percent move the other way, because that's what we've been having actually for a while now," El-Erian assured, on a day where major U.S. stock indexes, oil and gold were plunging.

The economist cited a few factors that could drive stocks up or down, including liquidity injections from central banks and companies.

Related Link: It's Only The 6th Time In The Last 50 Years The S&P Has Recovered Like This

In an email to Benzinga following his CNBC appearance, El-Erian explained, "If you step back from the day-day market movements, it becomes clear that, for quite a few months now, stocks have been in a range-bound fashion reflecting the competing influences of a weakening global economy and continuing liquidity injections from central banks abroad and corporate balance sheets."

"The size of the range, and the both upper and lower bounds, have been amplified by patchy market liquidity," he added.

Finally, he concluded, "this explains the fast and notable recovery in stocks that we saw in February and the first half of this month. But it also increases the possibility of a downward move in what will remain a roller coaster ride for investors."

The SPDR S&P 500 ETF Trust SPY was recently trading around the $202.40 level. It's up about 1 percent year-to-date.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.