With economy looking all rosy, most people say this is the most ridiculous question to ask right now. However, deep inside the boom another crisis is brewing. Most financial firms these days are originating loans and selling them to government agencies.
However with recent downgrades of these firms by S&P the danger of mortgages bringing a second dip in this recession might come true. These companies currently take on billions of dollars of credit risk. However if you believe the rating agencies the probability of these companies becoming bankrupt is much real today. If this happens we would see a whole new set of defaults happening and this means new losses for the financial sector.
Because of massive support of the government, the financial sector in US has been able to come out of the crises but it is still weak. It does not have the capability of facing a complete new set of losses put forth by failures of these firms.
So from the desk of Compare broker analyst, we recommend staying away from investing in financial sector currently. On the other hand we believe investing in manufacturing makes much more sense. The reasons being manufacturing indexes looking up showing signs of growth, with high unemployment workers are available at low rates for manufacturing firma as well as high government spending in road construction and infrastructure development throughout the world. Manufacturing is going to be the next blue chip during the recovery process.
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