Buy everything U.S. if Britain leaves EU: Prudential’s Peters

By Jennifer Ablan

NEW YORK (Reuters) – Gregory Peters, a senior investment officer at Prudential Fixed Income with more than $621 billion of assets, said on Tuesday he thinks U.S. stocks and bonds are a “great” buying opportunity if Britain votes to exit the European Union.

“I think it is a bullish U.S. asset story period, if this thing does happen,” Peters said. “I think it will be a great buying opportunity for U.S. assets, from Treasuries to high-yield ‘junk’ bonds. It may not be an immediate response of a U.S. rally, but I do believe it will be a buying opportunity which will unfold in the medium/long term.”

Britain will hold a referendum on June 23 on whether the country will leave the European Union, a process often referred to as “Brexit.”

Peters, the former Morgan Stanley chief global asset strategist who sounded an early alarm about the financial crisis, said his thesis is that if “Brexit” happens, “it still will be multi-years of uncertainty that will create capital flight to the U.S. marketplace.

“So if Brexit occurs, it will be out of United Kingdom and the European Union – and into the United States.”

Peters warned in November 2007 that there was a greater than 50 percent chance that mortgage losses would cause a systemic shock that would bring the financial system to a “grinding halt.”

In 2014, Peters warned investors that the Federal Reserve would raise benchmark interest rates more gradually than many believed and accurately described the interest-rate cycle as “later, lower and longer.”

Peters remarked on Tuesday’s appearance by Federal Reserve Janet Yellen, whose Fed delivered its starkest warning yet on its assessment that U.S. stocks are pricey.

In the Fed’s twice-annual Monetary Policy Report, the U.S. central bank concluded: “Forward price-to-earnings ratios for equities have increased to a level well above their median of the past three decades.”

Peters said: “I am shocked as that was the whole intention of QE (Quantitative Easing) to push investors out the risk curve…so what did Janet Yellen expect?”

(Reporting By Jennifer Ablan; Editing by David Gregorio)