The man who told the world that a financial crash was on the way is more laid back and relaxed about the current state of the global economy.
M&G Optimal Income Fund manager Richard Woolnough is credited with seeing the 2007 financial downturn on the horizon.
Despite what many finance ministers and economists view as worsening global economies due to falling output, near zero inflation and weakening currencies against the US dollar, Woolnough feels enough actions has been taken to ward off another collapse.
He argues that policymakers have done enough to put financial controls in place to prevent the world slipping back into recession.
Odds are lower than markets believe
“If I was a betting man, I think the markets are placing odds of another recession far too high because the regulatory landscape has changed considerably in the past few years and governments and central banks have more control over their economies.
“The oil price also plays a large part in driving economic cycles. Recession generally follows a prolonged period of rising prices, but the oil price has fallen over many months.
“Lower oil prices are a tax break for many developed countries, lowering energy prices and making the cost of goods cheaper and applying monetary policy easier.”
Woolnough also believes that because of market jitters, investors are too scared to put their money into some safe investments.
Look to corporate bonds, investors told
“Corporate bonds have revealed some excellent investments in recent weeks, but many people are afraid of a downturn and are staying out of the markets when they should be buying,” said Woolnough.
Markets prices and bond returns are out of alignment.
He explained commentators are writing in default rates of 4% in UK BBB bonds, which historically have a default of 0.4%.
“The market is scared to take a risk, but some fund managers are not and I’m certainly pleased no to take a pass on the profits,” he said.
In his message to investors, Woolnough also warned that he felt US Presidential hopeful Donald Trump was a far larger risk to the global economy than most other factors due to his unpredictability and far right views.
