NEW YORK (Reuters) - Another deflationary wave of global credit strains, heralded by the Greek debt crisis, will broadly punish riskier assets, technical analyst Robert Prechter said on Friday.
U.S. stock markets will erase their past six months of gains “in a matter of weeks,” said Prechter, president of research company Elliott Wave International, in Gainesville, Georgia and known for predicting the 1987 stock market crash.
Investors should opt for the safest possible investments, putting their money in very short-term Treasury bills or cash, he said, reiterating this long-expressed preference based on the expectation of long-term economic weakness.
Prechter maintained his call, made in January, that the dollar should continue gaining against the euro for about a year.
The euro hit a 14-month low against the dollar this week on investors’ concern about the crisis in Greece and some other heavily indebted European countries.
In a telephone interview with Reuters, Prechter also predicted a “dramatic widening” of U.S. corporate bond yield spreads over Treasuries, which he said has already started.
Over the next few months, junk bond spreads are likely to widen substantially, he said. Over the next six years, as the U.S. economy weakens and more corporations and municipalities default, spreads will widen further as prices of corporate and municipal bonds fall, he said.
Prechter has previously said he believes the 2007-2009 markets crisis and U.S. recession were harbingers of a severe, longer economic downturn. His book “Conquer the Crash,” first published in 2002, warned about the dangers of a deflationary depression. Prechter maintains the U.S. economy will struggle for years to come.
Reporting by John Parry; Editing by Chizu Nomiyama and Dan Grebler