Short the Industrial Sector: Equity Strategist

Those looking for opportunities to short stocks and want to avoid the ban can bet on a downturn in the industrial sector, Simon Goodfellow, Head of European Equity Strategy Research, ING Wholesale Banking told CNBC on Friday.

Return on equity (ROE) in the sector is at a historic high 21 percent, compared with a median of 9 percent, which means the sector is prone to fall, Goodfellow said.

"It is quite literally incredible. The ROE in the industrial sector is the highest it has ever been, and absolutely no-one is forecasting any serious downturn," he told "Squawk Box Europe."

"And when the downturn comes it won't just be a small six or 12 months affair, it will be a proper two-year, maybe even three-year affair. This is where the shorting activity should go," he added.

(Watch part one of the Simon Goodfellow above and click here for part two >>>).

Regulators recently slapped bans on various types of short-selling around the globe but most have to do with the battered financial sector.

Return on equity is too high for stocks in Europe in general, Goodfellow said, adding that a downside for markets was very likely.

"The fact remains that return on equity in Europe is over 16 percent at the moment. If you have any belief in statistics, we're going down," he said. "Combine that with PEs that could be in distressed territory and you have some fairly significant downside."

Markets need to be propped up by government and central banks actions to stay healthy, Goodfellow added.

"The longer we go around pretending that everything is normal and don't get a rescue package and we don't get any rate cuts out of the ECB and all of the other things … the more likely this frankly high distressed level of downside is to occur."