Emma Wall: Hello and welcome to the Morningstar Series 'Market Reaction'. I'm Emma Wall and I'm joined today by Hargreaves Lansdown’s Head of Research, Mark Dampier, to talk about Article 50.
Hello Mark.
Mark Dampier: Hi Emma.
Wall: So today the Prime Minister is invoking Article 50 and will be triggering Britain's exit from the EU. It's rather pertinent, not because the event itself will have any impact necessarily on the market, but because it marks 12 months of political turmoil which has had an impact on markets. Perhaps we could recap on the things that have driven returns over the last 12 months.
Dampier: Well markets have gone up. So, I can't help but giggle slightly at that, because most people have just hated this bull market. And 2016 was kind of continuation of that be it kind of a bit more sectorised and the oils and miners were the big winners and if you weren’t in those stocks you didn’t actually have a perhaps a great 2016.
But 2016 just was a continuation of what I think is an event overload for investors ever since 2008. We can go from one event to another which just puts people off. And we saw loads of people actually come out of markets altogether in 2012 worried about Greece and whether they were going to exit. And here we are now and we've started this countdown and we've just got something else to worry about.
Wall: And if you'd call the events of last year correctly. You probably wouldn’t have called the market reaction. Because Project Fear said, if we voted to leave the EU there will be a recession. There will be a market downturn. So, I suppose to your point that shows how laughable it is even trying to predict what the market, how the market will react to a political event.
Dampier: Well political or economic really. I just think that we have this event overload and people, even if they get the event decision right they probably don’t get the consequences of that right. So, Brexit was a great example, where in fact the markets fell for two days and then broadly just went up against what people thought.
So even as we cashed out maybe sometime a week or so before. In fact, the best buying opportunity was about three weeks before when the market fell. But everyone has sort of forgotten that, but I don’t reckon many people would have bought on that Friday, I don’t think many people would have bought on the Monday and then the market just kind of carried on going up.
Now I know you're going to have arguments about whether it's valued in dollar terms and sterling terms or whatever. But the reality is for U.K. investor it went up and if you cashed out it was wrong. So, I think people used too much emotion and we’ve got lots of it now with Brexit and we're going to see it for the next two or three years and people are going to try and guess results, guess what might happen all of which I think is going to be a total waste of time.
Wall: So, as investors we are famous for being very short term and having very short term memories. So, if we could learn one thing from the last 12 months which would help us navigate the political quagmire which is upcoming European elections and potential further Brexit fallout what would that be.
Dampier: Well the danger is I'm making myself really unpopular with you and just about the entire media circus, which is stop looking at all the media virtually. I mean it's just not terribly helpful to actually – to investment. Because I think it makes you, or danger of you making emotional decisions on your investment. So, people cash out of, one of the most unpopular areas at the moment is Europe and probably the U.K. but actually they are not bad places to invest and haven’t been over the years. So why would you necessarily do that.
So, I think you start making these decisions, whereas certainly at Hargreaves Lansdown our focus is really finding the best fund managers. We prefer them to make the decisions. We try and make as few as decisions as possible and if I had advice for a private investor or professional investor is make as few decisions as possible. Because the more decisions you make the more likely you are to lose money and particularly around things like Brexit.
I mean two years’ time… is it two years’ time, is it 10 years’ time? Are we really going to know anything, are we going to know anything better next week, week after? No. But I bet that Neil Woodford Charles great people like that that we tend to buy. They'll just carry on, playing on and companies get used to all this. They have got used to this over the years, they have especially in Europe. It hasn’t stopped it being a bad investment place to be. I think really the answer is put a diversified portfolio together and pretty much leave it alone. So, switch off the news if you need to, go off and play golf, go fishing, go sailing do whatever you like, but stop looking at the screens all the time. Because that’s what leads you to the wrong conclusions.
Wall: Mark thank you very much.
Dampier: Thank you Emma.
Wall: This is Emma Wall from Morningstar. Thank you for watching.
