John Bennett: Global oversight has ‘catastrophically failed’
Henderson Global Investors’ John Bennett said the global economy remains the victim of “monumental and catastrophic” failure by regulators and central banks.
The manager of the £90.4m Henderson European Focus trust said he blamed US Federal Reserve chairman Ben Bernanke as “chief” among the failing central bankers.
“The Fed keeps interfering with the US market and is not allowing it to cleanse,” he said. “What they need in the US is a recession. Markets got too excited about allegedly strong numbers coming out of the US in recent weeks.”
The manager said that before the end of the bear market, which he believes will come in 2015, the US will be downgraded again. He added: “At the moment, there is chronic overvaluation of Wall Street and I think the S&P 500 is overvalued by 20-30 per cent. Bear markets tend to end in revulsion and I feel the US needs to feel some of that but it is difficult as this is a presidential year.”
Speaking on the downgrade of nine eurozone governments by ratings agency Standard & Poor’s earlier this month, Mr Bennett said he agreed with the action, adding that the agency was “very late” taking it.
France, which lost its AAA rating in the slew of downgrades, is currently the largest country weighting in the portfolio, at 28.4 per cent, and the largest overweight position compared with its benchmark.
The manager, who took over management of the trust in December 2010 has been increasing his position in pharmaceuticals, which is currently at 20.5 per cent of the portfolio, but he said that this could go as high as 25 per cent, and possibly to 30 per cent.
“In pharmaceuticals, they used to have to find a new drug to boost the share price but they don’t need to do that any more,” he said.
“We are going to see big surprises as we see increased research and development and it is possible that they could fund a drug.”