The group’s head of multi-asset sees a significant contraction of the auto sector, which while not catastrophic for the economy, could be a “significant headwind”, potentially leading to a reversion to the ‘stagnant growth, low inflation’ scenario of a few years ago.
He said: “In recent years, large amounts of debt have been used to support auto sales and there is some emerging evidence that this is leading some borrowers to become distressed.
“Like mortgages, auto loans in the US are securitised and default rates on sub-prime auto loans are picking up.
“Additionally, used values for autos have been falling which could lead to losses for auto makers.
Jane also says reflation is the market’s greatest risk currently and as such is bullish on equities and sees real assets as highly attractive.
