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The London South East, Investing Matters Podcast, Episode 19, Janet Mui, award-winning investment industry commentator

LSE 00:01

You are listening to Investing Matters brought to you in association with London South East. This is the show that provides informative educational and entertaining content from the world of investing. We do not give advice so please do your own research.

Peter Higgins 00:18

Hello and welcome to the Investing Matters Podcast.

My name is Peter Higgins and today I have the huge privilege with speaking with the award winning investment industry commentator Janet Mui CFA qualified, Janet is the head of market analysis at Brewin Dolphin, and is a voting member of Brewin Dolphin’s Asset Allocation Committee. Janet has over 15 years of experience in macro research, and was previously the global economist at Cazenove Capital.

Janet is responsible for the commentary and communication of Brewin Dolphin its macro investment views to clients and the media. And he's a frequent guest on the BBC Sky News, Bloomberg, CNBC, Janet won the best industry commentator award at the 2001, City of London Wealth Management awards. And Janet has a first class degree in economics from the London School of Economics and the MBA finance at Cambridge University. Wow. And also named LinkedIn Top Voice and Finance for 2020. So, Janet, so thank you very much for joining me.

Janet Mui 1:19

Thanks, Peter, for having me, really delighted to be here.

Peter Higgins 1:22

Now, I know you were on the news again this morning. So I'm very, very pleased and thrilled for you to be joining me today. I wanted to start if I may, Janet with asking you. You're very busy. You're on Bloomberg recently. Firstly, want to share with us what led you to the world of economics and the investment industry?

Janet Mui 1:41

Yeah, I've always been fascinated by Macro Economics. Because you know, when I was a teenager, you read the news, and you read all about the stock market, I find it fascinating. And I chose to study economics in my university degree, especially loving the Macro Economics aspect, because it's so related to our daily lives, right?

I want to know more about finances, investing is all very interesting stuff to me. And I feel that in real life, actually working in finance is even more interesting than the studying itself. Looking at the markets every day, you know, it can be volatile, at times you learn so much. And I think personally speaking is very beneficial as well, because you learn more about investing.

I'm so glad I'm in this industry, because I feel that financial education is a bit lagging. And I feel that, you know, I'm very lucky to be in the industry for a long time. So I managed to save and invest early on and that really has been very beneficial. And I feel very lucky because of that.

Peter Higgins 2:43

Love that reply. Now. I'm intrigued because one of your qualifications is a postgraduate certificate in econometrics at Birkbeck College. So tell me about that and explain to me what that actually is about that specialism?

Janet Mui 2:57

Yeah, so econometrics is a quantitative study and analysis of economics. So economics can be qualitative analysis. And also quantitative.

So quantitative is basically exploring the relationship between different economic variables, as you make a prediction to the best of the ability depending on historical data. It's not always perfect, but it gives you a general sense, or you know about different techniques, and you use the statistical package because you cannot do it by hand.

So there are many statistical package to help you do it. So a lot of economists will use that helping we're forecasting things like GDP, inflation, or even direction of markets. It is very beneficial. I did a one year part time study because I was actually working and I did a few evenings per week, and it has been helpful.

Peter Higgins 3:47

Brilliant. Now, obviously, all that analysis and quantifying all what's going on around the world is vitally important right now. We seem to be having a whole flux an array of things going on. Now, given what we know, of what we've seen at the moment. What are your current thoughts regarding the markets, the volatility, that turbulence? What are your current thoughts about it all?

Janet Mui 4:06

Yeah, I think a very important change this year is that a lot of the positive drivers for markets are just going into reverse, right?

We have very supportive monetary policy, fiscal stimulus, we have very strong growth, right, all the reopening and pent up demand. So it was a very positive story. But then this year, everything goes into reverse. So we are in a much more difficult environment and it could last as long as inflation is high.

So there is a real risk that inflation is a more elevated than people anticipated. So we do think that markets are getting more difficult and you know, people are so comfortable and so used to the high returns previously when we have ultra-low interest rates, but it is going to be a bit tougher and I think people need to manage expectations.

Peter Higgins 4:51

Yeah, I completely agree with you. Now, please give us an overview of the sheer scale and importance of your role and responsibilities at Brewin Dolphin please?

Janet Mui 05:00

Yeah, I think my role is really, really interesting is my dream job. I think I think because I'm a economists background, I link economics with investment strategy, we will have a lot of discussion every day about asset allocation, tactical and strategic. And that basically forms the basis of how we manage our portfolios. And we manage over 60 billion of assets, right for our clients.

So it is a hugely important role. Of course, you know, the decisions are taken within a committee. So it's a group decision, our team plays a very important role in formulating those micro strategy. So I really enjoy that. And also have a lot of client facing and immediate facing element, which I really appreciate. Because you don't always get those roles.

Because you either do you know, you focus on the quantitative aspect, managing the portfolio, or you you're the product manager, you go and talk to clients, right? So I love that it is a mix of both worlds in terms of, you know, speaking to clients about our strategy, and also actually behind the scenes, managing all these portfolios.

Peter Higgins 06:04

Now, obviously, you're on the TV and the media quite a lot. But please tell us about the investment services that Brewin Dolphin often provides for all of its different clients.

Janet Mui 06:14

Yeah, sure, absolutely. So we're a wealth manager, we are one of the biggest in the UK. And we, I think a special thing about Brewin Dolphin is that we really do serve a wide spectrum of clients.

So a lot of people have the impression that wealth manager only serve the very rich, very wealthy people, you know, people have the impression that oh, I need to have a million pounds in the bank to get served. But with technology, I think things are really changing. We serve clients from all spectrum. Whether you have, I don't know have a thousand Pounds to invest or you have a monthly savings plan or have hundred Pounds, there are solutions that work and depending on your risk profile, you can choose the right portfolio for you is all being managed by us managed by our team, readymade portfolio diversifies most of choices. So we have four different client target.

Depending on the wealth spectrum, we're very proud that we can serve people from a very diverse background. And I think we really take pride in that because I don't think many wealth managers can proudly say that they sort of full spectrum of clients.

Peter Higgins 07:17

Now, I'm industry because I volunteer to support several charities and I'm an ambassador for one charity as well. So I'm intrigued about the services that you provide for charities. Can you expand on that for me, please?

Janet Mui 07:28

Yeah, we also manage portfolios for charities. So that's institutional clients, obviously, they would have quite different needs, because they have the spending criteria, and they have a much longer time horizon has also we have a dedicated team, also one of the biggest in the UK that specifically manage charity clients.

Basically, we serve individuals, institution, charities, intermediaries, etc. So really wide spectrum of clients. Each division has experience in serving that particular clientele. As I mentioned, every client has those particular needs and charity is one of them.

Peter Higgins 8:06

Thank you very much now, March 2020, just two months after your brilliant promotion, and you've got your dream job. RBC stepped in and said, we love what Brewin Dolphin are doing. We'd love to buy you become a larger part but part of a larger group, RBC Canada, does that mean we're going to lose you from our shores your work in the Midlands, you're doing work at Cambridge University, you grace Leicester, many moons ago when you went to Leicester Castle Business School? What does it mean going forward for green dolphin this merger, this takeover?

Janet Mui 8:38

Yeah, well, is going to be positive, obviously, with the synergy of both very good brand names out there and obviously offers a more international platform. I think we have yet to be seen how the merger will work going forward.

I think a lot of work is spent on that background. And I don't think there's a lot to disclose at the moment. I'm not supposed to disclose, and I don't think I know more than what is being published out there available publicly. But we do feel very encouraged and very excited about the outcome.

Because we have a very strong investment solutions. And that's very attractive proposition. And the merger will allow us to further broaden the distribution of those investments solutions. So it is a very great opportunity for us to expand further in terms of distribution. And of course, I think getting the expertise potentially from the whole RBC group, they have very strong analyst team in all the major asset classes, I think from that knowledge and research point of view is I think it's very powerful. So that will ultimately be very beneficial to our clients.

Peter Higgins 9:45

Thank you now, Janet, you've got a great interest and passion for all things ESG and ESG investments. What are your thoughts regarding the ESG sector, the growth and also what's happening in the capital markets regarding it?

Janet Mui 10:00

Yeah, well I think ESG is an unstoppable trend. I think it is getting increasingly clear, right. I think from the regulatory point of view, we are just getting more and more regulation demand for ESG related disclosure, more investments will be going into the field, I think the war in Ukraine further accelerate the shift to green energy.

So, that certainly helps the E, environmental related investment is really the key of the ESG investment so far, because is the investment theme of environmental is just more apparent than the S or the G or I think more more more and more investment will be going to the renewables.

This is unstoppable right with everyone trying to transition away from fossil fuel and more. So with the war going on, it will be a multi-year process is not going to be a near term, you know, near term growth style is suffering at the moment. So the ESG related style also related to the world style is also suffering, but the longer term trajectory remains intact, supporting from both of you know, consumer preference point of view, regulatory point of view, and just the need to transition to green energy. I think we're very positive on the sector.

Peter Higgins 11:10

Okay, so the FCA published the ESG integration to UK Capital Markets Report recently. So which Richard Stone the Chief Executive of the Association Investment Companies responded, it's vital that investors can trust ESG data and ratings which are increasingly used in investment decision making. So we strongly support the FCA view that greater regulatory oversight is essential to provide reliable and objective information. How is the regulatory status quo at the moment? And does it need to be improved?

Janet Mui 11:43

They still, I think, a lot of discussion and lack of clarity on the standardisation of how you look at ESG. Right. There are a number of providers that provide some more quantitative analysis of ESG. But I don't think there's really a gold standard, like a standardised approach that is approved by a single body that is applied globally, it is just not there. So I think a lot is still up to the investors’ interpretation itself.

So that makes the calibre of those ESG professionals so important, you know, there can be a wide disparity of those people in the field, but those who really know what they're doing versus those who may be very likely to subject to greenwashing, potentially, which is increasingly a problem, and which is being really actively invested by the regulators more and more so. So I think there is opportunity when there is such discrepancy, and lack of clarity going on.

So the best of the field will certainly benefit from the trust of the public. And I think, yeah, definitely more needs to be done in order to create that trust in the public.

Peter Higgins 12:49

Yeah, love that reply. Now, can you share with us how Brewin Dolphin are working within that space? And what you and your team are doing? On the ESG front, please?

Janet Mui 12:57

Yeah, certainly, we integrate ESG in our investment process, there's a few pillars really is like we consider ESG criteria in all our investment aspects. We also offer more specific ESG driven investment that people you know, they want to have a higher standard, or they really want specific ESG goals, then they can also access those investment, we have a dedicated team to select the funds, and put them together in a portfolio that people can choose.

From a corporate perspective, we also you know, we're dedicated to ESG, we sign up for net zero. So it's really embedded in both from an investment perspective, or whether you're talking about day to day, the running of the corporation perspective. And we have expanded our team in the ESG area. And we also have many processes, you mentioned about the trust.

So we have a number of processes in place, like controversy tracking, for example, that really enables us to distinguish between the genuine ESG focused companies versus those who are not.

Peter Higgins 14:02

Loved that response now wasn't the answer to this little bit later. But I'll ask it now. You mentioned Net Zero and obviously, along with ESG. That's one of the most talked about trends at the moment. How best would you say that ESG and then Net Zero should be measured? Because it's where do you start? Where does it end? The measurements of Net Zero?

Janet Mui 14:22

Yeah, it is difficult to quantify but I think there are more and more ways that you can try to quantify it at the moment. I think for financial services company like us, we actually don't produce too much carbon in comparison to the firms that, you know, are directly producing stuff or those who are actually in mining or energy specific.

If you're taking us as an example it will be about for some of the travel like the carbon footprints that we have when our employees travel for example, course all the you know, electricity that we use in the company. So there would be ways that we can measure those carbon footprint approximately.

And we will look at the ways that how we can actually reduce those carbon footprints. Or, for example, how we can travel more efficiently, you know, taking trains, versus taking planes or whether you can, we can also do more video courses that have staff travelling around.

So those are ways that we can do it. And of course, energy efficiency in the building we are constantly I think we have a team proper responsibility that actually looks at the way we run the business and look at operations, identify areas where we can reduce the carbon footprint, yeah, that those are the things that we can do as a financial service company.

Thankfully, we're not the biggest producers on carbon footprint. So we are looking at ways that we can further minimise the impact.

LSE 15:44

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Janet Mui 16:03

Janet, you're one of the leading women in the wealth management industry, while your insights are sought after, and you were asked to present, talk, deliberate, be on panels or events all around the world.

I want to talk at the minute because we're trying to motivate so many young women to get into STEM to get into finance to get into industries which are male dominated. I want to ask you, if I may, what you're most proud of what you've achieved regarding leading for women in the industry so far?

Janet Mui 16:32

Yeah, I feel really proud because as you say, there's really a lack of woman, I'm from Hong Kong, Chinese, and especially the UK, really a lack of Asian woman, I think most of us have when I go into client meetings, presentations, seminars, are mostly men, very few woman, I'm very proud that actually they're listening to me.

So I'm actually going in there, giving them the talk, informing them and they're all listening to me. I'm the expert there. So I'm really, really proud of doing that job. Because it's not easy. I feel like throughout my career, I need to make more efforts to be recognised, I feel that I need to work a lot harder for me to be regarded.

Even if, for example, I say the same thing as a man, I think that people subconsciously replaced a higher wage to the things that guy say, I think that's my impression. That's just my personal experience. I'm not saying everyone is experiencing that. So I feel I always have to work harder to achieve what I deserve.

So I'm very proud that I've managed to and I did I work very hard. I did all the qualifications. I did the ESG certification from CFA, and I did a part time econometrics course right after I did the brutal CFA. So I really put a lot of efforts and worked very hard. And I'm very proud of the achievement.

Peter Higgins 17:52

Yeah, and clearly, that's been recognised by the team the other leaders of Brewin Dolphin, because you've got that dream job you got promoted in January of this year. So congratulations on that front.

Janet Mui 18:01

Thank you. Thank you. Yeah, I'm very glad fan really very supportive organisation.

Peter Higgins 18:06

And it's growing, you got advisors across 32 office networks Janet. So that's a big team. But you're –

Janet Mui 18:13

Such a great team spirit here is such a grab for happy to to work here. Everyone has the goal to serve our client in the best interest. We are very passionate at what we do. So I think you can see in the results, right?

Peter Higgins 18:26

Absolutely. Absolutely. I've met I've met some of your colleagues and they always look happy regarding what they're doing and loving their job. So that's a good culture to have in the in a large team, isn't it?

Janet Mui 18:35

It is a great culture.

Peter Higgins 18:36

Brilliant. Now regarding experience, right, Aldous Huxley, is an English writer and philosopher and he wrote: “experiences, not what happens to you is what you do with what happens to you”.

I wanted to ask you, if you'd be so kind to share with our listeners, one of the significant experiences of your investing career, what it was, what you did as a consequence, and how it has shaped your thinking, and your career so far?

Janet Mui 19:02

Well, since my career started in the City of London, I think there are quite a few memorable moments well witnessed the Abenomics, which I remember, I still remember everyone was so pessimistic on Japan.

I mean, rightly so because it was in deflation for such a long period of the last decade. And then Abenomics came. I mean, initially people didn't feel as optimistic. But then actually you look at the drivers like all the monetary and the fiscal stimulus, etc. It was the structural reforms is really unprecedented. It's really amazing. And I think at that point in time, I was still quite junior, and I was talking about all you know, Japan, Japan, is an opportunity is something that is quite exciting going forward. But I don't think people actually were buying into that because they were so used to that mindset of oh, is deflation, that nation, no grow that bad demographics, even though actually there are a lot of reasons why you should actually be buying Japan to the point.

I just feel that sometimes with the City of London, I think some fresh minds should be appreciated because I think some people are we're so stuck in that mindset. For example, right now, we have very high inflation, right? And I remember last year, everyone was saying, yeah, inflation is transitory because no one believed that there will be high inflation because there was quantitative easing, you know, there was always money printing, but there was no inflation.

So everyone got stuck, like, yeah, interest rates will remain zero for the foreseeable future, inflation is going to be low, no matter what happens. I think people sometimes need to refresh their mindset and don't get stuck where they were, I completely understand that when they have that experience for years, it didn't change. But there will be times when actually things turn a corner. I think some people are just too stuck sometimes. And they really need to think differently.

Peter Higgins 20:55

I agree with this. There's a far too much issue regarding fixed mindsets within the industry and other industries as well. I think we need to broaden our horizons and think deeper and like you say, bring in some fresh faces with different viewpoints.

I think that enables the markets to create a little bit of liquidity and fluidity. Now, you mentioned earlier about this being your dream job.

I wanted to ask you about being a role model for younger girls. I've asked it slightly already. But I want to ask again, because my daughter has been saying to me since the age of 11. She wants to be an architect.

Right? And you said an early age if you wanted to get into financing and maths which routes are you most passionate about? Regarding the industry for young woman wanted to become the next Janet Mui? The other study but also the career path possibly.

Janet Mui 21:43

Well, I'm a bit biassed, though. Like I personally, I think economics is really the basis of how the city functions. I think you need to really understand economics to be in any good roles in the city. You can be economist, of course that requires economic knowledge. If you're a fund manager, you need to look at the economy, your stock analysts, arguably you look at the macro, you also need to understand the dynamics.

I think having a good sense of economics is hugely important in any part of the city is a fundamental and it's good for yourself as well for your personal development, good for your you know, savings, investment attitude.

So I'm biased economics, normally knowledge is very important and forms the fundamentals of many, many roles in the city. If you look at the career path of many successful city people, a lot of them have the economic background. And then they after they have the solid foundation, they can choose to be you know, a fund manager that can be a strategist, they can be a stock analyst, it really brought it gives opens doors for you shall I say, but of course, I do whatever you're passionate about.

Peter Higgins 22:52

Brilliant, thank you for that. Janet, I want to ask a little bit about your own personal investing, if I may, regarding your own investing style, what you do with your ISA, so if you have one, etc. So we can find out where your thinking is and how that differs regarding the market cycles.

Janet Mui 23:08

Yeah, yeah. So my investment philosophy is that, I mean, I save every month, and then I wouldn't keep a lot of cash, I keep the cash that is necessary to sustain my outgoing for, I don't know, maybe six to twelve months, and then I invest the rest, I always make sure that I am invested. For example, now with the market coming down so much, it is actually a good opportunity, right? For me it is I don't care if the market actually goes down by another five to ten per cent. I know that when I put money in regularly monthly.

Now, I know that in a few years’ time, my money would be more than it is now I'm pretty confident about that. Having seen the market cycle, I always put my investment in various areas, right, I would have exposure to growth style stocks, for example, quality growth, because I know that those companies will do well regardless of whether we're going into recession. I will also have defensive like gold, I will have some gold and also have some bonds. I mean, just typical diversification, right?

Because I'm in the industry, I know what I need to do. Of course, I also have portfolios of turnover. I also invest my money often, because I know how good our team is. And so it's a matter of savings. I think saving is very important. Don't spend outside of your means. I think that's very important. Yeah, always save for the future and investors and actually market downturns is very good entry point actually, you don't panic and if you're young actually you can afford to wait and be very patient.

Peter Higgins 24:50

Thank you for that. Now I wanted to ask them to get a bit deeper regarding your investing style and ask for the benefit of our investors. How do you go about choosing selecting, filtering the quality companies that you choose. How do you go about that process?

Janet Mui 25:06

Yeah, sure. So, well, quality company, what is good quality company, they are those companies that have a long term good growth prospect.

Those companies, usually they have good network effect. They are the top players in their field very hard to replace, they have good pricing power, like even with inflation, now they can easier pass on the cost to consumers.

They're very dominant in their field. And they have very good balance sheet though. So they have a lot of cash in their accounts, which they can deploy, actually, when we have a recession, there are loads of good buying opportunity. And those companies would have the cash actually go and buy other companies, right. So cash in the bank, good long term prospect good pricing power.

I wouldn't name the names but you know, there will be some the top players in that particular field that will fit those criterias I think those would be the first steps that you can try to filter out those investment will make me able to sleep at night, no matter whether we go into recession or not.

Peter Higgins 26:11

It's important you said about being able to sleep at night, I think it's important that people are not distressed when they're having investments or they're in the wrong investments per se. Now we're experiencing a great deal of turbulence, which you've mentioned earlier, and increased volatility at the moment due to rising interest rates.

You've mentioned rising inflation, energy costs, geopolitical conflicts, etc. During such difficult times, the best course of action is usually take a deep breath and focus on one's long term investment goals, which you've mentioned before.

However, this is easier said than done for many inexperienced investors. As an experienced economist and investment strategist, Janet, what advice would you give to long term investors at this time about staying calm?

Janet Mui 26:51

It is, of course easier said than done. It's just human psychology. We have loss aversion, right. We don't want to lose money. So it is natural to acknowledge that you are fearful of the current market drawdown, I think you can look at a long term chart of the S&P 500.

Back then, when we had the global financial crisis, the market time, and then you look back, the market has more than double right.

I mean, this is what market does volatility. But long term. Remember, by being in the market, you're investing in companies’ earnings, right. So typically, company earnings, they grow in line with GDP growth, they typically does so if you say if you invest in a broad index, let's forget, like you're invested in a single stock.

That's super risky. I'm just saying that if you invest in a broad index that you typically invest in that country's GDP growth, right? Unless you expect, while GDP growth is going to decline every year, then typically nominal GDP growth do grow over time, unless we're in recession, but we wouldn't be in a recession every year. Right.

So typically, the long term trend is still growth. If you believe in that, then fundamentally, if you invest in those company, you enjoy those growth. So I think that's a very important reminder, you invest is basically investing in the company's profit, which typically grows over time. And the recession is typically just a short period of time, you don't actually tend to see recession, often.

Mostly it is steady growth over time. So I think keep that in mind, then you will feel better. And historically speaking, indeed, markets recover, right? Remember, the most recent COVID fall, it was very scary, I was looking at the screen down basically circuit breaker every day, and then look at how the market has rebounded very swiftly.

Imagine if you sold at Autumn, that will be very painful. Well, I'm not saying that this time around, it will recover as quickly but it will eventually it will take probably take longer time compared to the COVID. But the worst thing you can do is to sell at the bottom, you'll come to regret it is actually best not to do anything and just ride it out.

Peter Higgins 29:04

Love that response. Now, that very important aspect of what you just said there is about the market psychology aspect of it, understanding calm of it, how much importance do you think investors should put on regarding psychology? Because it doesn't seem to be enough regarding that at the moment. There's lots of panic and fear.

Janet Mui 29:24

Yeah, I think the media has something to do about it as well. Constant negativity had obviously like a self-fulfilling prophecy.

If you read about the gloom if you read about the inflation every day, it's kind of self-fulfilling, in a way I think, made worse by social media nowadays, so I can totally understand the panic. And other way would be if you want to sleep at night and you don't feel confident.

I think it's best leaving it to an expert to help you manage the money if you're really that concerned, because that expert would take all the burden of the worry from you, he or she will have the responsibility to look after your portfolio.

Make sure we're doing the best to smooth out the volatility minimise the risk, given your risk appetite. So if you really, really are so concerned and really not confident in managing your money, I think it's, it's best to give it to an expert.

I think it's worthwhile doing that. And in terms of the psychology, yeah, everyone has their own feelings has their own emotions. So what we do at Brewin Dolphin is that when there are times of stress like this, we will communicate well will hold our client’s hands more, because we know this is the time that they need us the most. It's just like, the COVID time it was so volatile, I did the most number of presentations ever that year.

You know, we're there when the client's needs us. So I think the communication part is absolutely important. There's never too many communication when there is volatile period, the best we can do is to hold our client hands, we can't it's out of our control, the client’s emotion, everyone has their own emotions, psychology, we will do our best to soothe those nerves.

Peter Higgins 31:02

Brilliant. I love that response. I love what you're saying about the art of communication and being there for your clients. I think it's so important, especially at times of stress, as well to be able to do that. Now I wanted to ask you a little bit about the side of it regarding investing with regards to the volatility we've got now, are you an advocate Janet or is Brewin Dolphin an advocate for pound cost averaging? Or are you more of an advocate for lump sum investing?

Janet Mui 31:28

I think investing on a monthly basis is a good idea for most people, you're the average population, you earn a salary you save, and then every month you're left with a chunk of money, I think it makes sense to do that. Because it tends overtime, it tends to smooth out the volatility. So I think that really works for most people, under any circumstances.

For lump sum, I think you need to make a bigger call, right every time you invest that lump sum. So I think if you're keen to do the lump sum investment is best to research more, to talk to people more to understand more.

So there is just inherently a higher risk of the timing of that lump sum. So I think for the average population, I think averaging works well. And you know, with technology is actually is much cheaper now, to regularly invest, you know, the transaction costs have come down a lot, the trading costs come down.

So it could be worth doing that. If you have a lump sum is, depending on the size of the lump sum, it could be a very big decision is best to seek professional advice, if that's the case.

Peter Higgins 32:34

Thank you for that. Now, I wanted to ask you two last questions here. Firstly, Brewin Dolphin’s macro outlook, given what we've got going on at the moment regarding the turbulence all around. I'll go with that question first. And I'll ask you the second question. What's your macro outlook at the moment, given all the noise or the volatility?

Janet Mui 32:54

Yeah, clearly, the macro outlook has deteriorated, especially if we are seeing this massive rate hikes in the US. Well, basically, well, slowdown is an avoidable and high risk of recession. And this is just typical for a cycle when the Fed raises interest rates, you know, the economy usually slows down and that's exactly the purpose because they want to bring down inflation.

So I think the macro view is that we are going to see slower growth, more downward growth revisions, especially in the Euro area. We're very concerned about the cut off potential cuts off of Russian gas to Europe. I think people were thinking it is a terrorist. It could potentially materialise in the winter, you know, Russia may well weaponize this leverage, right.

So I think the macro is getting gloomier having said that, we think that the slowdown or if there's a recession, it will be a mild one, primarily because this is typical cycle, which is triggered by higher interest rates. Nothing more sinister than that is not the financial crisis when you have a combination of failure of the housing market, and a systemic failure of the banking system.

So that is a very powerful failure of from all sides. So this time around, we're not anticipating that so is, is a typical cycle of where the central bank's fighting inflation, very high inflation, higher interest rates, economic slows down. Once inflation comes down.

Hopefully, central banks can actually embark on cutting interest rate and typically, a bull market starts when interest rates are starting to be cut. Yeah, that's how micro I think near term, but we don't think it is going to be as bad.

Peter Higgins 34:38

Thank you. Now you've mentioned European markets and what's going on regarding all of that and the difficulties that may have one of the problems and recurring problems as I see and read about is that as investors, especially UK investors, we're very UK centric.

So obviously a similar proposition regarding Europe. How do we go about encouraging investors to be more global in their investment plates in a sense of where they're investing rather than being Eurocentric, and UK centric?

Janet Mui 35:05

Is always worth it to look beyond your geographical region, I completely understand that because people tend to have home bias, because they know the companies they understand better. But actually, there's so many opportunities out there and actually is much more easier, accessible now, right compared to the past, you know, with the platforms and the opportunities offered by various portfolio.

So I think, take the current situation, as an example, right? Like, I know that the markets has fallen. But if you have hold U.S. assets, actually, the dollar strength is actually quite helpful. So you get some sort of diversification from the currency as well, looking beyond your domestic bias is like outside of your comfort zone. Again, a lot of research needs to be done. If you're uncomfortable. Again, seek professional advice. There are lots of opportunities out there. And there are experts who can select the right investment for you. And always believe in diversification, not just the geographical diversification. But it's also from a currency perspective, it's actually very helpful, for example, in the current scenario, but I understand that people may not be comfortable doing that.

So again, I will say, if you're not comfortable, always seek professional advice.

Peter Higgins 36:24

Brilliant. Now, I've got a concluding question for you. That's what you need to share with us really, and for investors, the potential for long term investment and why they should always persist with long term investing, if you may?

Janet Mui 36:37

So there are many benefits of long term investing. So first of all, as I mentioned, typically an economy growth, typically at 2%, for developed markets, and you add, typically 2% inflation. So normally, you'd get, for example, four to 5%, nominal growth every year, typically, your company earnings will be that and typically, that's kind of the returns that you could be anticipating so is much better than leaving your money in the bank. I'm saying on average, like typically, and always you saw these cycles, right?

You see market time, but you always see markets recover, you can see in the very long term charts of any stock market. So I think that's very important. And of course, you have the benefit of compounding dividends, right. So if you invest in company stocks, if you invest in an index, for example, the UK, for example, offers you one of the highest dividend yields in the global markets. And those dividend yields actually compounds over time and is very, very powerful. It gives you a total return, you're not only getting the price return, you get dividends. And overtime, we all know the magic of compounding, the longer you invest, the more powerful those compounding is.

So if you're young, it is really, really powerful. You start young, you know, there are many figures that we can cite, you know, a scientifically and statistically proven that it is a very powerful driver of return. Long term wise, we all know there's inflation. I mean, right now, inflation is rampant. But there's always inflation, whether you're talking about 2% 3%, if you leave your money in the bank, you will erode your real spending power.

Anyway, I'd much rather put my money in a broad index, for example, or in a portfolio, that gives me that nominal GDP growth linked return, then, possibly close to zero interest. I know that interest rates are rising at the moment, the bank is not going to pass through all that interest rate increase to a deposit account. So you're always going to get your interest rate that is lagging inflation rate. So you will lose your real spending power over time over many years.

That's, again, very powerful. If you look at the long term chart of the real value of 100 pounds over the year is amazing how much value you lose over the course of say 20-30 years. There are many charts that I mean, I can show you here, but there are many charts, many statistics that show the power of investing over time. It's not a scientific actually scientifically proven.

Peter Higgins 39:10

Brilliant. I love that full response to it Janet. It's been an absolute pleasure to speak with you today. That was Janet Mui, the Head of Market Analysis of Brewin Dolphin. Janet, thank you ever so much and wish you all the very best and all your colleagues the very best going forward. And I look forward to speaking with you and meeting with you over at Nottingham at some point as well if not in London, take care God bless.

LSE 39:42

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