A Year Since Lockdown: What We've Learned

VIDEO: A year since the UK first went into lockdown, Morningstar Investment Management's Mike Coop looks at some of the lessons learned by investors

Holly Black 23 March, 2021 | 10:42AM
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Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Mike Coop. He is Head of Portfolio Management at Morningstar Investment Management. Hello.

Mike Coop: Hi, Holly.

Black: So, Mike, we;re here, I've been in my home for a whole year. It's 12 months since lockdown was first implemented in the UK. So, I thought worth having a look back at some of the things we've learned as investors. So, where should we start?

Coop: Oh, certainly, things to talk about, Holly. I think for me front of mind is policymakers still pack a punch. People thought that with interest rates being very low, there's not much that the government could do. But actually, we've seen the return of fiscal policy and an incredible amount of support. So, policymakers are still very important in terms of what happens to the economy and what happens to markets.

Black: Yes, it turns out they can just take on an incredible amount of debt. What is the second thing you've learned over the last 12 months?

Coop: The second thing is ESG is here to stay as a force for investing. Societies have put more value on fairness and responsibility to the environment. Legislation is picking up. Acceptable norms are changing. And assets are being repriced on the back this. So, very important for people to be able to take this onboard and working out how much to pay for an asset and the risks that they're taking on while they own it.

Black: Yes, and I mean, we've been bleating on about ESG for years, but what is it about the pandemic that put it front of mind for so many people who weren't thinking about it before?

Coop: That's a great question. I think it's a combination of things together with the pandemic, just an unawareness of people doing it tough, how the pandemic has affected many folks who were struggling to start with, and it's brought that into the public domain to a greater extent than was probably seen beforehand. So, I think it's just raised the profile of those issues and people have realized that things have to change, have to improve so that we don't get a repeat of that.

Black: And what's the third thing we've learned from a year on from lockdown?

Coop: Well, I think, valuation is still a better guide than macro forecasting if you're trying to spot investment opportunities, if you're trying to manage risk, and all those behavioral biases were there on show with people basically extrapolating, first of all, great conditions persisting in '19 and then terrible conditions persisting or forever. So, I think people just naturally tend to look at recent conditions and think they will persist, place a very low probability on changes. And the fact is the record of economic and market forecasters remains dire because the world is complex and random, can't be modeled with precision. So, when you see people panicking, when you see them revising their expectations so that for a long time they expect dire situations to arise, that is a better guide to you spotting an opportunity than trying to guess what's going to happen to the economy.

Black: Well, yes, and as we've seen a stock market can be at record high even when an economy is at its worst nadir. Mike, thank you so much for your time. For Morningstar, I'm Holly Black.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Holly Black  is Senior Editor, Morningstar.co.uk


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