Stress in the American auto loans market and rampaging student-loan delinquencies in the US were also cited as potential “canaries in the coal mine”.
Jupiter also warned on the explosive rise of the so-called FANG tech stocks of Facebook, Google, Apple and Netflix to now representing a significant proportion of the S&P 500 index of US shares.
The team compared the rise of FANG to the rise of financial services in the UK to around 12% of blue-chip indices before the 2008 crisis, before eventually collapsing to just 3% as their true value was realised.
Investors should be wary about investing passively generally in current times, with many equity trackers being automatically loaded up with potentially overvalued FANG shares, the team said.
“When you have a narrow leadership of a big and broad index, that is a ringing of the bell that investors should be wary about investing in passive indices,” said Smith-Maxwell.
“It could be a very dangerous time for investors to go into passive investments.”
“In a down market, index trackers are condemned to be in markets they don’t want to be exposed to,” said team leader, John Chatfeild-Roberts.
On the bond side, the team warned of the “huge” duration risk seen in fixed-income passive funds today, as opposed to actively managed funds that are able to move to short or negative duration positions to reduce their exposure to rate rises.
The Merlin multi-manager funds have performed strongly under tehe team’s 18-year tenure, with the Jupiter Merlin Growth Portfolio gaining 331.2% compared to an IA Flexible Investment return of 133.6%.
