Word on the Street: podcast of the month
Is now a good time to invest?
Mike Haslam, Head of Funds Distribution, and Jean-Paul Jaegers, Head of Asset Allocation, discuss the UK ‘feel-good factor’ and whether now is a good time to invest. They also talk about the impact of a weak pound, what to expect from the new UK Prime Minister and how lower interest rates in the US could affect investments.
Word on the Street
Word on the Street is a weekly news and financial markets podcast where leading investment experts discuss events that have been making the headlines. Each month we feature one of the podcasts online, but you can listen to all of the Word on the Street episodes by subscribing below.
About our experts
Head of Asset Allocation
Jean-Paul joined Barclays in 2018 and leads the team focused on asset allocation of our investment offering. With nearly 15 years’ experience in investment management, Jean-Paul frequently contributes to CNBC and more.
Follow Jean-Paul on LinkedIn
Head of Funds Distribution
Mike is a specialist in investment funds, with over 20 years’ experience in the asset management industry, and in client-facing wealth management.
Follow Mike on Linkedin
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Welcome to Word on the Street – a weekly podcast from Barclays UK where our experts help ordinary investors make sense of the latest news and events impacting the world's financial markets.
This week we discuss the UK feel-good factor, the impact of a weak pound and low interest rates, and what to expect from the new UK Prime Minister, with Mike Haslam, Head of Funds Distribution, and Jean-Paul Jaegers, Head of Asset Allocation.
Mike Haslam: Welcome to Word on the Street. My name is Mike Haslam and this is my opportunity to look back over the week and have a look at some of the news stories that have been making the headlines in the media.
To help me sift through this, and help explain what's been going on behind the headlines, I'm joined by Jean-Paul Jaegers, Head of Asset Allocation. Thank you for joining me today.
I want to start off with the UK and I'm kind of getting this feeling or this perception of some kind of feel-good factor in the UK – and it's not just in the sport.
We've had the cricket, we've had the women's football World Cup, we've got the Rugby World Cup to come and obviously the Ashes to win as well. But I sense that over the last five, six, seven years – ever since probably 2012 when the Olympics were staged in the UK, or maybe it's the sun – this kind of uprising of a feel-good factor.
And even in the economy we've seen this as well. We've got unemployment at its lowest since 1974, the FTSE is now… what… tinkering around 7500, very close to all-time highs, and interest rates are at virtual all-time lows – good, I guess, for investing and capital spending.
We've also had news as well that Jaguar is to build a new electric XJ model here in the UK in Birmingham and we've had pretty decent housing numbers picking up as well,
And the whole Brexit side we seem to have this sense of ‘just get on with it and move on’, so everything's seeming a little bit more positive, JP. What do you sense?
Jean-Paul Jaegers: Hello, Mike. As is so often the case with an economy, there are always positives and negatives that we can find. Indeed, as we look to the employment rate, we see it’s at a four-decade low and, in combination, wages are rising.
We see that consumers are in good shape when we look at retail sales, so indeed there are a lot of good things that suggest the economy is in a good shape.
But at the same time we also see that companies are holding back on investments, which is some sign of a running up of inventories, and in some parts house prices are softening a bit as well. So it feels there are fingerprints on the economy, with the likely suspect being Brexit.
MH: So does this mean I should be investing now, if I'm feeling good, if I'm feeling confident, should I be investing now?
JPJ: If you invest, in particular for the long term, you will never find the perfect moment. We always tell clients it's about diversification and diversify your investments and let the power of compounding, rebalancing, and diversification come together in a multi-asset portfolio.
The number of things we know almost for certain is that events do come and go, and we know that assets are really comfortable and profitable at the same time.
MH: The only worrying thing that is possibly impacting me personally at the moment is, I'm looking at the strength of sterling, so the strength of the pound.
About this time of year, we wander down the post office, pick up our currency for holidays and this year we are going to find that we will be picking up a few less euros, a few less dollars, for our pound. What’s the story behind that?
JPJ: Yes, that's correct Mike. So we see that sterling dropped in value as the ‘no-deal’ Brexit gets more airtime. So you will get fewer euros and fewer dollars for your pounds.
And we see that both versus the euro and the dollar the pound lost almost 6% in the past few months. Where we mainly will see this, and quite directly because the UK is quite an open economy, is in import prices.
So if you go for groceries and they come from abroad, that's where you will see prices picking up.
MH: And we saw this drop off in 2016 as well.
JPJ: Exactly. That's a good example. After the referendum outcome at 2016, the pound dropped quite materially and we did see that inflation – and that's the pace of price rises for a basket of consumption goods – did pick up afterwards in the UK.
MH: And finally sticking with the UK – a new Prime Minister. Will we be seeing any impact from here?
JPJ: There is one task the new Prime Minister has to face and that's delivering Brexit. For us as investors it's hard to see the developments ahead of time because as we have seen, it can take many twists and turns along the way.
MH: Let's move over now across the pond to the US. I've been reading a lot about interest rates and the possibility of rates falling. But what does this mean for investors? What would that mean for me?
JPJ: As an investor, if you buy shares, in a way you buy future earnings. And how much you're willing to pay for those future earnings, it depends in a way on the alternative.
You could put your money in the bank or you could buy those shares. If you earn 5% in the bank account and buy the shares, it might be different than if you get 0% in the bank account and buy the shares. So at zero you are more likely to buy shares if you think they're returning more than 0%.
MH: Got it. So it’s me, instead of putting money in the bank account, thinking, ‘Actually I’m going to bet on that company delivering higher earnings next year, I think I'm going to buy those shares.’
MH: Okay, I get it: so low interest rates are more positive for equities. And I guess it’s how you value equity, not the companies themselves. So with that in mind, with rates coming down, does that mean you are positive on US equities – they must be good?
JPJ: At the moment in US equities we hold a similar proportion in client accounts as we would usually have, so we're not particularly optimistic or pessimistic.
We do think that interest rates are helpful for stock markets in the US but at the same time we also think that earnings could disappoint a bit.
MH: Got it okay. So we've covered the US. UK, any final thoughts on markets in general?
JPJ: At the start of our conversation we talked about diversified portfolios. So what we do for clients is we hold a range of assets – we hold bonds, stocks – and at the moment, if we look at the world, we aren't particularly excited nor very pessimistic.
But there are a lot of things going on at the moment, so if you look at trade wars, if you look at Brexit, so in that way we're relatively neutrally positioned at the moment.
MH: And that's your world obviously – to understand what's going on, what's valued in, and then to manage the investments accordingly.
JPJ: Yes, indeed.
MH: JP, thank you very much for your time today, very insightful as always, thank you.
All investments can fall as well as rise in value and their past performance is not a reliable indicator of a future performance. This podcast is not a personal investment recommendation.