The head of European equities at Henderson, John Bennett, has issued a stark warning to those investing in sub-prime markets. Bennett warns that the same mistakes made in 2008 are being made again today and the results could be disastrous. This raises the question of where to invest to keep your money safe.
New focus, old problem
While banks and lenders may have learned their lesson in the area of sub-prime mortgages, Bennett warned recently at an investment trust conference that sub-prime lending is still alive and kicking in other sectors and named the car industry as a key player in this new threat. Companies still trying to make up for 2008 losses are prompting their car finance divisions to lower lending requirements to move cars off the forecourt. Bennett sees this combination of lack of management and desperation for growth as a cocktail for disaster.
The third industrial revolution
Bennett puts the onus for fiscal responsibility firmly on the shoulders of the manufactures. He warns that with the coming of the third industrial revolution, traditional manufacturing industries will need to change and evolve to stay alive.
Likewise, Nick Davis of Polar Capital told investors last year that they should be cautious when backing the European manufacturing and car companies. With China devaluing its currency, concerns about abnormal markets were rife.
Back to bricks and mortar?
With so much uncertainty in the markets, it might seem a good time to put money into physical property once again; however, this raises the question of where such investment should be made. Property experts such as Robert Stones Target Markets have highlighted a very positive notice on the housing market from the Bank of Italy for the coming year.
While improvements to the Italian housing market have been slow, they have been consistent and investors from around the world are seeing the benefits of investing in property that can also be used and enjoyed.
A bleak outlook for the markets?
Bennett admitted that Henderson had been looking at its old strengths – namely oil and pharmaceuticals – to deliver long-term returns; however, in the last year this had not paid off and the trust made a loss of 3.4% in the first quarter of 2016. This result will make more than a few investors very unhappy.