Yeadon says we are still in a “recession not depression environment” which points to two fundamental differences between now and what happened in the 1930s.
He says: “Back then, banks were allowed to collapse, something that has not been allowed to happen on this occasion and then there is the rise of protectionism.”
Yeadon says corporate earnings could fall by 40 per cent by 2009 but something in the region of 50 to 60 per cent has been priced in, resulting in potential market opportunities.
He says: “The case for equities has been driven by valuations and despite a fall in corporate earnings it still looks attractive. I expect you will see a big January effect where lots of managers will be in play in the market, expecting a bear market rally.”
Yeadon says corporate bonds look more attractive at the high-quality end due to downgrades and defaults. He says he is looking at some bond funds and possibly a tracker.
He says: “Now is the time to move away from gilts and towards strong investment-grade corporate bonds. With property, we are looking at another 25 per cent fall in valuations in the next year or so but the market is already there. It is not cheap enough and we have got a weak economy and difficult financing environment.
“On the positives, valuations have improved from the bubble levels which we saw in the middle of last year. Rental problems will come into the market but we have not got the overbuilding or the massive oversupply that we had in the early 1990s.”