Speaking at the Cazenove Capital MultiManager Live event, Woolnough said the UK is doing its utmost to kickstart the housing market through the Bank of England monetary policy committee slashing bank rate, rekindling lending through Northern Rock and helping people who have been made unemployed stay in their homes.
He said: “If the Government does turn it around, it will start turning financials around and that will start to turn the economy around but the warning is that this is going to take time.”
Woolnough also believes investors looking at banking bonds need to be aware of the inherent differences between the current banking bubble and the dotcom bubble of 2000-03.
He said most investment-grade bonds came through the previous bear market intact but on this occasion, some may have investment-grade which may need to change to equity.
Hargreaves Lansdown investment manager Ben Yearsley says: “This is likely because, as with New Star, banks may have to take equity if a firm struggles to repay its debts and ends up breaching its covenants.”