Woodford claims market bubble is about to burst

‘There are so many lights flashing red I’ve lost count,’ declares fund star

NeIL Woodford has warned that global stock markets are at risk of a ‘ bigger and more dangerous’ crash than ever before.

The fund manager said savers ploughing money into overvalued shares were committing the same errors as those made during the dotcom bubble and before the 1990s recession.

‘The market appears to be making the same mistakes again, but this time the bubble has grown even bigger and more dangerous,’ said the City veteran.

The 57-year- old ( pictured), who looks after £15bn of savers’ cash, said low interest rates and money printing by central banks had skewed the markets, with investors piling huge sums into risky investments.

He also sounded the alarm over the dramatic rise in the value of crypto-currency bitcoin, which smashed through $10,000 this week, and low levels of volatility which could be a lull between crises.

‘There are so many lights flashing red, I’ve lost count,’ he said in an interview with the Financial Times.

‘Ten years on from the global financial crisis, we are witnessing the product of the biggest monetary policy experiment in history. Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations.

‘This is a period when stock markets have the ability to seduce investors [into believing] that making money is easy.’

Woodford, who founded Woodford Investment Management, said traders needed to be more wary of risks. His comments came after his own investments have suffered setbacks this year.

A disappointing drug trial caused Astrazeneca shares to suffer their biggest ever one-day loss, while Imperial Tobacco and the AA were hammered, and Provident Financial – which Woodford called ‘a major blow up’ – crashed out of the FTSe 100. ‘I’ll put my hand up. That was a mistake,’ he said.

But instead of ‘chasing the zeitgeist’ by buying fashionable tech stocks, Woodford said he was backing traditional UK firms whose shares had become cheap due to ‘Brexit-driven hysteria’.

These included housebuilders Taylor Wimpey and Barratt Developments, banking stocks such as Lloyds and fashion retailer Next. He said Next was ‘one of Britain’s biggest online retailers’ but it was being overlooked in favour of trendier, onlineonly rivals Asos and Boohoo.

He said he would stand firm on his current approach, despite his setbacks this year. ‘It is the most uncomfortable position I have been in during my career,’ he said. ‘But I believe, I’m absolutely right. I don’t know when I’m going to be proved right, but I’m utterly convinced that I am right, as I have been right before.’

He added: ‘In the dotcom bubble it was the old economy stocks which became profoundly unloved and undervalued, and today in the UK stock market it is domestically focused stocks.

‘The funds I manage are positioned to exploit this opportunity and I am utterly convinced it will pay off when the bubble bursts – which I believe it inevitably will.’

He stayed clear of tech stocks in the dotcom boom and also gave a wide berth to bank shares before the 2007 crash. The decisions cost him in the short-term but established Woodford’s reputation.