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Investors need to prepare for "unsettling volatility," and the S&P 500 could plunge back to June lows, top economist Mohamed El-Erian said, cautioning of upcoming mayhem in stocks.

"I think there's value under some very attractive single [stock] names. But you just can't avoid the macro factor right now," he said in an interview on CNBC on Friday, predicting that the S&P 500 was set to retest lows near 3,600. By midday, the index hit 3,674.

The S&P 500 already started downwards since the Fed announced another 75-basis-point rate hike on Wednesday.

El-Erian, who is the chief economic advisor at Allianz, warned of "an accelerated loss in confidence in policy making," adding that policy has gone from "a repressor of volatility to an amplifier of volatility."

He added that $50 billion has flowed into cash money markets in the last week, meaning that investors are fleeing equities, high-grade funds, bonds, and other risk assets. 

And dysfunction in US bonds, which has seen lower liquidity lately, is also problematic, El-Erian added, since the Treasury market can't be separated from other markets due to its broad impact. 

"They can create very unsettling volatility, not just volatility," he said, noting that turmoil in Treasurys is structural and has largely been exposed to the Fed's quantitative easing, which doubled its balance sheet to $8.9 trillion.

El-Erian has been vocal about criticizing the Fed's policies and their slow response to rising inflation, which he says has caused rate hikes to be more aggressive than otherwise would have been necessary. Previously, he said a hard-landing was "uncomfortably possible."