James
Gard:
Welcome
to
Morningstar.
With
me
today
is
Michael
Field.
He
is
our
European
Market
Strategist.
Thanks
for
joining
me
today,
Michael.
So,
every
month
we
get
together
and
we
try
and
discuss
the
salient
points
in
the
market,
what’s
been
going
on,
but
this
is
the
last
conversation
of
the
year.
So,
we’re
also
going
to
look
ahead
to
2024.
I’m
also
excited
to
talk
to
you
today
because
we’ve
had
three
central
bank
decisions
back-to-back,
and
the
markets
are
on
the
move
today.
So,
there’s
a
lot
to
think
about
at
the
moment.
Should
we
start
with
this
year
and
then
move
on
to
2024
after
that?
Michael
Field:
Absolutely.
So,
obviously,
2023
has
been
a
really
eventful
year
and
not
only
just
for
good
reasons.
We
started
out
the
year
thinking
that
we
were
going
to
be
on
this
kind
of
structural
upswing
after
the
pandemic,
China
reopening,
a
lot
of
positive
catalysts
to
look
forward
to.
And
then
of
course,
we
had
the
banking
crisis
in
March
and
then
things
continued
on
from
there
really,
markets
rallying
and
then
waning
over
the
course
of
the
year.
But
thankfully,
and
like
you
said,
today
is
a
really
interesting
day.
You
have
a
lot
of
excitement
from
the
Fed’s
decision
last
night
and
the
minutes
around
the
Fed
meeting,
which
I
actually
thought
were
pretty
benign.
I
didn’t
think
they
said
anything
in
particular
that
gave
us
this
great
hope,
but
the
market
seems
to
have
just
latched
onto
it.
And
you
see
markets
rallying
today.
And
if
you
look
at
where
we
are,
the
S&P
500,
the
Euro
stocks,
the
FTSE,
it
doesn’t
really
matter
which
of
those
three
you
look
at,
they’re
all
really
close
to
all-time
highs,
which
given
that
we’re
not
out
of
the
woods
yet
that
we’re
still
–
European
economies
are
still
teetering
on
the
brink
of
recession,
it
seems
quite
crazy.
But
there
you
go.
Gard:
Sure.
Yeah,
making
notes
to
talk
to
you
today,
I’d
written
“against
the
odds”
as
my
headline
for
European
markets
this
year.
And
despite
obviously
two
downturns
during
the
year,
European
markets
or
indices
certainly
have
done
pretty
well
considering.
And
I’m
leaving
out
the
U.K.
here
and
I’ll
maybe
circle
back
to
that.
But
yeah,
so
I
think
if
you
look
at
European
indices,
it’s
been
a
really
good
year
for
investors.
Field:
Yeah,
indeed.
I
think
against
all
odds,
I
think
you
might
have
stolen
that
from
a
love
ballad.
But
there
you
go.
Yeah,
it’s
been
a
pretty
–
like
all-in-all
for
investors
when
you
wrap
up
how
much
they’ve
gained
over
the
course
of
the
year,
it’s
been
positive.
Again,
whether
you’ve
invested
in
the
U.S.
or
indeed
Europe,
the
returns
have
been
double-digit.
Surprisingly
enough,
I
think
if
you
had
told
me
that
a
couple
of
months
ago,
I
probably
wouldn’t
believe
you.
So,
generally
speaking,
it’s
been
a
decent
year
for
investors.
And
then,
on
the
back
of
that
then
things
should
be
improving
over
the
course
of
2024,
at
least
in
terms
of
interest
rate
decreases
as
well.
So,
as
much
as
I
pointed
out,
that
it
seems
crazy
that
markets
are
close
to
all-time
highs,
you
can
certainly
understand
why
investors
are
confident
given
the
returns
that
were
generated
for
them
in
2023.
Gard:
Sure.
So,
I
mean,
the
conditions
look
good
for
the
end
of
the
year
rally
continuing
to
next
year.
But
just
to
stick
with
the
U.K.
a
little
bit,
the
U.K.
doesn’t
seem
to
have
participated.
If
you
look
at
the
FTSE
100,
it’s
the
same
as
it
was
effectively
at
the
beginning
of
the
year,
give
or
take
a
few
moves
up
and
down.
Why
do
you
think
the
U.K.
has
been
left
behind
really
in
the
global
rally?
Field:
So,
I
think
the
first
thing
to
say
is
that,
yes,
it
hasn’t
seen
the
same
gains
as
other
indices
year-to-date,
certainly.
But
your
point
that
it’s
similar
to
where
it
was
at
the
very
start
of
the
year
somewhat
ignores
the
fact
that
that’s
still
very
close
to
all-time
highs
as
well.
So,
in
terms
of
the
movement
it
had
or
the
scope
it
had
to
move,
it
hasn’t
done
that
badly
all
in
all.
But
there
is
some
truth
to
that,
of
course,
right,
why
it
missed
out.
I
think
structurally
the
FTSE
100
has
some
issues.
And
I
think
investors
are
very
much
picked
up
on
this.
And
this
is
the
trends
we’re
seeing
in
terms
of
equity
outflows
from
U.K.
indices,
which
have
been
negative
for
every
single
month
this
year
by
January.
So,
I
think
you’re
getting
this
rebalancing
of
global
portfolios.
And
the
U.K.
main
indices
are
just
less
attractive
at
the
moment.
It’s
primarily
stuffed
with
banks
and
natural
resource
firms.
So,
there’s
very
little
growth
industries.
It’s
been
well
documented
and
more
companies
this
year
shifting
their
main
listing
to
the
New
York
Stock
Index
instead.
So,
I
don’t
know
how
much
more
we
can
add
on
that
necessarily,
but
I
think
that
is
one
of
the
primary
drivers
why
the
FTSE
has
been
left
out
to
some
degree.
Gard:
Sure.
I
mean,
every
year
I
read
outlooks
from
banks,
asset
managers
saying
the
U.K.
is
very
cheap
and
this
next
year
will
be
a
great
year
because
it’s
a
great
buying
opportunity.
I
mean,
I’ve
read
it
so
many
times
that
I
mean,
eventually
it
might
come
true.
But
yeah,
don’t
expect
great
things
of
the
FTSE
per
se.
But
if
global
markets
do
well,
then
the
U.K.
should
sort
of
get
a
little
bit
of
a
boost
from
that?
Field:
Yeah,
I
think
that’s
fair.
And
look,
you
mentioned
it
yourself,
but
if
you
look
at,
for
example,
the
P/E
of
the
FTSE
100
relative
to
the
S&P
500,
it’s
trading
at
something
like
half
the
P/E.
So,
I
think
the
lesser
growth
profile
of
some
of
the
companies
that’s
contained
in
that
and
the
rather
dull
expectations
around
performance
are
priced
in
if
you
look
at
something
of
a
P/E
for
sure.
Gard:
Sure.
Yeah.
Well,
who
knows
really.
So,
thinking
ahead
now
to
2024,
this
is
kind
of
the
exciting
bit.
But
just
looking
at
your
recent
outlook
piece,
you
think
inflation
is
going
to
stick
around,
but
the
West
should
avoid
a
recession.
So,
things
look
teed
up
for
a
relatively
decent
year.
Field:
I
think
that’s
fair
to
say
overall.
Interest
rates
are
set
to
come
down
across
the
Western
world
as
the
three
central
banks
primarily
that
we’re
looking
at.
So,
that’s
certainly
a
positive
anyway
for
equities.
That
sets
up
the
story
quite
well
for
next
year.
Valuations
on
the
whole,
they’re
close
to
fair
value.
If
we
look
at
the
European
market
as
a
whole,
it
is
close
to
fair
value.
But
within
that,
there’s
plenty
of
gaps
and
there’s
plenty
of
unloved
areas
of
equities
that
investors
can
jump
aboard
on.
And
one
such
one
that
I
think
you
saw
online
today
on
Twitter,
I
put
a
tweet
about
it
earlier
was
the
utilities
sector
that’s
been
very
much
beaten
up
both
in
the
U.S.
and
Europe
and
is
offering
really
steep
discounts
at
this
stage.
And
investors
seem
to
have
ignored
certain
features
about
that
industry
and
the
fact
that
they’re
buying
stocks
that
are
growing
and
dividends
that
are
growing
rather
than
just
a
fixed
income
stream
as
they
are
with
bonds.
So,
it’s
not
a
like-for-like
swap,
which
is
what
some
investors
have
done
over
the
last
six
months
when
they’ve
exited.
So,
I
think,
yes,
there’s
definitely
certain
industries
that
are
set
to
benefit.
I
think
overall,
yes,
2024
is
kind
of
teed
up
to
be
a
better
year
in
some
respects.
But
what
I
would
caution
on
the
back
of
that
too
is
that
we’re
looking
at
–
still
in
the
U.K.
and
in
Europe,
we’re
looking
at
the
highest
interest
rates
we’ve
had
in
16
years
now.
They’ve
only
been
that
high
for
six
months
or
so.
So,
we
haven’t
seen
the
full
effects
of
really
high
interest
rates
feed
through
to
the
economy
just
yet.
It’s
starting
to.
You’re
looking
at
mortgage
applications
in
the
U.K.
or
mortgage
approvals
are
at
their
lowest
rate
now
in
over
a
decade.
So,
they’ve
fallen
40%
year-over-year.
A
lot
of
that
negativity
is
coming
through
right
now.
But
the
dangerous
part
I
think
for
businesses
and
consumers
alike
is
that
there’s
more
of
that
pain
to
feed
through
in
early
2024.
So,
I
think
for
investors,
yes,
there’s
opportunity.
Yes,
when
those
interest
rates
fall,
it
will
benefit
these
companies.
But
don’t
be
shocked
if
the
first
few
months
or
even
the
first
half
of
2024,
you
still
read
negative
statements
from
companies
and
you
still
see
some
of
that
negativity
coming
through
because
we’re
primed
for
it.
Gard:
Sure.
Yeah.
I
mean,
we’ll
pick
up
on
sort
of
earning
season
predictions
a
little
bit
later.
A
lot
of
people
are
remortgaging
or
moving
on
to
new
rates
next
year.
So,
there
will
be
no
doubt
a
lag
for
some
economic
sectors,
more
cyclical
or
exposed
sectors.
The
U.K.
retail
has
been
reasonably
resilient.
But
the
prospects
aren’t
amazing
for
next
year,
let’s
be
honest.
Field:
I
think
that’s
fair.
Yeah.
And
it’s
one
of
those
discretionary
areas
of
consumer
spending
that
people
can
cut
back
on
quite
easily,
not
buying
that
winter
jacket
that
they
wanted.
For
most
people
it’s
very
possible.
And
I
think
compared
to
–
we’ve
all
seen
our
heating
bills
and
things
like
this
–
I
got
a
shock
this
morning
seeing
mine.
So,
yeah,
I
think
the
consumer
has
been
hit
on
very
many
sides,
and
something
like
retail
is
something
that
they
can
easily
cut
back
on.
I
think
I
read
some
stat
recently
showing
how
much
excess
clothing
and
excess
items
the
average
U.K.
household
has.
So,
it’s
something
that
could
feel
pain
for
the
next
six
months.
But
on
top
of
that,
you’re
seeing
other
elements
as
well.
I
saw
some
stats.
And
this
is
slightly
peripheral,
but
shoplifting
is
at
ultra-high
levels
across
the
U.K.
and
Ireland
in
the
last
six
months.
So,
I
think,
that’s
very
indicative
as
well
of
just
how
many
people
are
really,
really
struggling.
So,
I
think
yet
indeed,
you’re
right,
we
could
see
some
pain
for
quite
a
while.
So,
I
think,
to
some
degree,
some
of
it’s
incorporated
into
valuations
already.
But
I
think
the
picture
is
really,
really
mixed
across
the
consumer
sector.
Gard:
Yeah.
In
your
notes,
you
said
that
you
can’t
see
an
obvious
catalyst
for
consumer
cyclicals
rebounding,
even
though
they
look
cheap.
Field:
I
think
that’s
fair.
And
you’ve
seen
some
sectors
of
the
consumer
segment,
as
in
travel,
for
instance,
that
picked
up
massively.
Gard:
Yeah.
Field:
I
think
one
of
the
problems
here
is
the
fact
that
if
you
look
at
the
number
of
hotels
and
restaurants
available,
it’s
still
below
pandemic
levels,
whereas
demand
is
back
to
pandemic
levels,
which
has
caused
that
imbalance
that
we
see
when
we
go
to
a
restaurant,
and
they’re
all
full,
right?
And
we’re
wondering
what’s
going
on
in
consumer
land,
have
suddenly
people
got
way
more
money
than
they
had
before,
which
isn’t
the
case.
So,
I
think
those
elements
of
consumer
discretionary
spending
are
caught
up
fully,
and
that
should
grow
at
a
normal
rate
from
here.
So,
there’s
no
real
catalyst
there.
And
then,
in
luxury,
for
instance,
was
one
we
were
touting
as
well
for
a
while
as
really
defensive,
marketing
themselves
more
towards
the
higher-income
consumer,
who
is
less
susceptible
to
not
getting
wage
increases,
it
doesn’t
matter
as
much
to
them.
So,
that
was
a
sector
we
touted
for
a
while
as
bulletproof
to
some
degree,
but
the
cracks
are
starting
to
show
there
now.
You’re
seeing
a
lot
of
luxury
manufacturers
talking
having
about
large
unsold
inventories
and
having
to
mark
down
goods
and
things
like
this
as
well.
So,
that’s
another
segment
of
consumer
that’s
struggling
a
little
bit
now.
So,
I
think,
yeah,
look,
there’s
obviously
exceptions
to
the
rule,
but
for
the
most
part
in
consumer
land,
the
average
consumer
only
has
so
much
money
to
spend.
Heating
bills
are
still
high,
utility
bills
are
still
high.
And
for
the
most
part,
like
you
mentioned
earlier,
a
lot
of
them
are
rolling
off
from
variable
mortgages,
and
their
monthly
payments
for
housing
are
going
up.
So,
something
has
to
give,
you
know.
Gard:
Sure.
Yeah.
I
used
to
think
it
was
a
case
of
kind
of
haves
and
the
have-nots
in
terms
of
the
wealthy
can
still
travel
and
like
you
said,
the
rest
are
cutting
back
significantly.
But
I
think,
there’s
a
lot
of
people
struggling,
and
that’s
not
going
to
change
dramatically
next
year.
So,
moving
on
a
little
bit
from
consumer,
you’ve
taken
bit
of
a
defensive
bent
for
your
sector
outlook
for
next
year.
I’ve
got
a
slide
here
and
you’re
looking
at,
at
the
moment,
healthcare
and
utilities.
You
mentioned
utilities
already.
With
healthcare,
it’s
quite
an
interesting
sector.
It’s
usually
a
defensive
sector.
In
the
U.K.,
Glaxo
shares
haven’t
done
particularly
well
this
year,
but
say,
Novo
Nordisk
had
an
amazing
year.
I
know
they
had
a
breakthrough
with
one
of
their
diabetes
drugs,
I
think
it
was.
What
would
be
your
picks
in
terms
of
within
that
healthcare
sector?
I
think
you
mentioned
oncology
and
innovation.
Field:
Yeah.
I
think
the
first
thing
to
touch
on
there
is
the
focus
on
the
defensive
sectors.
It’s
not
that
we’re
saying
they’re
the
only
sectors
you
can
invest
in.
What
we’re
saying
is
if
you
look
at
the
picture
–
and
this
is
not
only
on
European
basis,
but
a
global
basis
–
if
you
look
at
the
investment
picture
currently
and
which
sectors
are
screening
up
as
good
value,
there’s
quite
a
bit
of
options.
You
have
consumer
cyclicals,
which
is
one
of
the
cheapest
sectors
still
at
the
moment,
communications,
financials,
for
instance,
all
of
these
are
screening
super
cheap.
But
some
of
them
are
cheap
for
a
reason,
that
there’s
a
large
investor
concern
over
some
of
these
really
highly
exposed
cyclical
stocks.
And
yes,
we
think
things
are
picking
up
to
some
degree
in
2024.
The
interest
rates
cuts
when
it
feeds
through
will
be
a
positive
catalyst.
But
in
the
meantime,
if
you
look
at
the
economies
of
the
U.K.
and
Europe,
they’re
still
teetering
on
recession.
The
U.K.
had
a
pretty
decent
GDP
reading
the
other
day.
But
by
decent,
I
mean,
it
was
up
30
basis
points
month-on-month,
which
isn’t
something
to
necessarily
pop
the
champagne
open
about.
And
then
Europe,
again,
you’ve
got
negative
readings
in
Europe
at
the
moment.
So,
I
think
economies
are
teetering
around
recession.
Investors
are
aware
of
this.
So,
that’s
why
they’ve
applied
this
pretty
sizable
discount
to
the
cyclical
sector,
because
they
know
that
there’s
a
danger
if
they
invested
in
some
of
these
really
cyclically
exposed
stocks.
And
we
go
into
a
recession
that
they’re
going
to
feel
pain
before
things
eventually
come
right.
And
they’re
very
much
aware
of
that.
So,
what
we’re
pointing
out
is
something
of
a
counterbalance
and
a
midway
point
is
the
more
defensive
sectors
like
pharmaceuticals,
which
we
mentioned,
and
then
utility
sectors
as
well,
something
that
offers
you
a
little
bit
of
protection,
if
indeed
we
hit
a
bump
in
the
road,
and
the
economic
situation
gets
worse
before
it
gets
better.
So,
we
mentioned
utilities
and
people
are
very
much,
I
think,
aware
of
the
defensive
qualities
of
utilities
and
the
predictability
of
their
revenue
streams.
We
all
have
to
play
bills,
and
that’s
where
that
money
ends
up
at
the
end
of
the
day.
Pharmaceuticals,
obviously,
another
very
much
defensive
industry.
Usually,
this
is
one
that
I
don’t
really
highlight,
because
it’s
usually
fully
priced.
People
are
very
much
aware
of
the
defensive
qualities
of
the
industry,
and
people
are
very
much
aware
of
the
growth
profile
of
the
industry
as
well,
and
they
think
it’s
worth
a
premium.
Not
this
time
around.
I
think
what’s
happened
this
year
is
you
have
a
number
of
fears.
So,
a
lot
of
these
companies
–
and
you
saw
Pfizer
had
a
release
the
other
day,
and
they’re
struggling
with
COVID
drugs.
Basically,
sales
aren’t
coming
in
as
expected
from
COVID-based
drugs,
which
is
one
of
investors’
concerns.
So,
it
seems
like
investors
have
been
rightly
concerned
when
it
comes
to
areas
like
this
that
they
thought
these
drugs
might
disappoint
this
year.
And
they
seemingly
are
right.
We
took
down
our
fair
value
estimate
of
Pfizer
slightly
the
other
day.
We
still
see
a
lot
of
value
with
that
name.
But
we
took
the
fair
value
estimate
down
slightly.
But
in
other
areas,
like
you
said
as
well,
immunology,
oncology,
et
cetera,
those
are
the
areas
where
we
see
the
growth
profile
really
strong
over
the
next
few
years.
And
investors,
one
of
the
other
concerns
they
have
is
around
the
patent
cliffs
and
whether
the
growth
pattern
is
good
enough
to
make
up
for
that
patent
cliff
shortfall
that’s
going
to
happen
over
the
next
few
years.
And
this
is
the
discount
they’re
placing
on
the
stocks.
But
again,
you
see
areas
of
breakthrough
all
the
time.
And
you
mentioned
Novo
Nordisk.
And
then
that
comes
around
with
the
weight
loss
drugs,
essentially.
And
the
market
is
getting
a
little
bit
excited
about
weight
loss
drugs.
But
the
flipside
is
that
is
they’re
very
much
ignoring
the
oncology
and
the
immunology
drugs
that
I
mentioned
a
couple
of
seconds
ago.
So,
there’s
definitely
areas
of
the
pharma
sector
now
that
are
presenting
themselves
as
opportunities,
and
very
much
defensive
opportunities,
which
again,
I
mentioned,
is
the
sweet
spot
going
into
2024
with
all
the
uncertainty
that
we’re
facing.
Gard:
Great.
Yeah,
that’s
certainly
a
compelling
case
for
looking
at
that
sector.
Just
looking
at
next
year,
things
that
could
blow
up,
basically.
No
one
really
foresaw
the
–
I
won’t
call
it
a
banking
crisis,
but
it
was
certainly
a
banking
storm
in
March.
Are
things
okay
there?
And
would
you
add,
say,
commercial
property
into
the
things
that
could
just
really
surprise
to
the
downside
next
year?
I’ve
given
you
two
questions,
basically
–
but
are
banks
going
to
explode
again?
And
is
there
going
to
be
some
sort
of
reckoning
for
the
commercial
real
estate
sector?
Field:
I
think
the
answer
for
both
is
no
in
that
none
of
them
are
going
to
blow
up.
I’m
trying
to
remember
exactly
how
you
phrased
the
first
question.
No,
banks
indeed,
so
everyone
had
a
panic
March
this
year.
It
feels
like
about
two
years
ago
at
this
stage,
but
it
was
only
March
this
year.
And
we
thought
that
there
was
going
to
be
this
domino
effect
across
Europe
and
the
U.S.
with
banks
blowing
up.
And
after
the
Credit
Swiss
debacle,
nothing
really
happened.
And
then,
our
analysis
at
the
time
pointed
out
that
European
banks
were
pretty
well
capitalized.
And
that’s
still
the
situation
we
stand
by
and
the
analysis
we
stand
by
as
well.
I
saw
a
chart
recently
done
by
one
of
our
banking
analysts
looking
at
the
largest
banks
across
Europe.
And
if
you
actually
look
at
the
capital
buffer
for
each
of
these
banks,
it’s
sizable.
So,
all
these
banks
are
pretty
well
capitalized.
That’s
not
to
say
that
nothing
can
happen.
Banks
as
part
of
their
business
model
rely
to
a
heavy
degree
on
leverage.
So,
that’s
always
a
risk.
But
from
a
capital
perspective,
they’re
as
well
capitalized
as
they
possibly
could
be.
So,
there
shouldn’t
be
another
banking
crisis
on
that
basis.
In
saying
that
–
and
this
is
our
slightly
contrarian
view
on
banks,
which
I’m
going
to
throw
into
the
mix
here
as
well
–
up
to
now,
we’ve
been
saying,
okay,
banks
are
kind
of
a
gimme.
Their
valuations
have
been
hammered;
you
should
be
buying
them.
But
what
we’ve
been
saying
since
about
the
third
quarter
of
this
year
is
that
a
lot
of
them
have
run
up.
Not
all
of
them,
we
still
see
some
opportunities,
but
banks
have
run
up
to
some
degree.
And
within
that
now,
the
returns
on
capital
that
they’re
actually
producing
are
probably
at
their
peak,
that
what
you
could
see
from
here
–
the
big
benefit
there
was
that
net
interest
margin
expanding.
So,
the
difference
between
what
they’re
lending
out
and
what
they’re
borrowing
at
was
finally
getting
to
a
decent
level,
and
they
could
start
making
some
proper
money,
which
they
did.
But
the
problem
from
here
is
where
do
they
go?
Like
you’re
having
–
I
mentioned
mortgage
approvals
are
40%
down
year-on-year
in
the
U.K.
So,
that’s
something
that’s
happening.
That’s
negative
for
them.
And
you
should
expect
bad
debts
and
the
bad
loan
book
to
increase
from
here
as
well.
We
think
it
will
be
manageable,
but
at
the
same
time,
that’s
a
weight
on
profitability
over
the
next
six
months,
maybe
a
year
as
well.
So,
from
that
perspective,
some
banks
are
looking
attractive,
but
the
overall
picture
isn’t
the
sunny
uplit
lands
that
we
talked
about
earlier
this
year.
Gard:
Sure.
The
best
may
be
over
in
terms
of
the
banks,
because
if
rates
are
probably
peaked,
possibly
certainly
in
the
U.S.
and
Europe,
it’s
not
going
to
get
any
better
in
terms
of
net
interest
margin.
Field:
That
seems
to
be
the
case,
James.
Looking
at
the
Bank
of
England
statements
today,
they’re
still
threatening
that
they
could
move
up
rates.
But
I
think
this
is
less
believable
at
this
stage.
I
think
they’re
just
giving
themselves
room
for
manoeuvre
in
case
something
untoward
happens
that
they
might
have
to,
and
they
don’t
want
to
shock
the
market.
So,
they
throw
all
of
this
in
the
mix
now
to
say,
well,
we
told
you
back
in
December.
Your
second
question
about
risks
to
the
to
the
economy.
Commercial
property,
yeah,
in
the
outlook
document
we
produced
here,
we
mentioned
commercial
property
as
one
of
the
risks.
To
some
degree,
I
think
the
market
has
got
a
reasonable
handle
on
what’s
happening
with
the
return
to
office,
which
types
of
commercial
property
are
being
used
and
which
ones
are
struggling.
But
there
is
a
lag
like
you
mentioned
with
other
sectors
earlier,
and
that’s
still
feeding
its
way
through
the
economy
as
leases
expire
and
things
like
this
as
well.
So,
I
think,
the
sector
itself
could
be
in
for
something
of
a
reckoning
in
2024.
But
will
the
ramifications
that
extend
to
the
wider
economy?
It’s
less
likely,
I
would
say,
at
this
point,
at
least
anyway.
There’s
many
other
left
field
risks
we
discussed,
or
I
can
probably
pull
out
as
well
to
the
market,
generally
speaking.
The
Chinese
economy
number
one
as
well,
and
property
–
the
property
market
there
Evergrande,
we’ve
been
reading
about
that
for
quite
some
time
now
and
defaults
around
that.
So,
I
think
there’s
plenty
of
risks
and
then
outside
risks
as
well,
like
the
risk
of
Taiwan
being
invaded
and
knock-on
effect
with
semiconductors.
But
I
think
at
this
point,
then,
we’re
getting
into
those
kind
of
real
tail
risks.
Gard:
That’s
the
sort
of
risk
that
we
were
expecting
this
year
to
come
to
fruition
but
may
well
become
another
risk
next
year.
But
again,
hopefully,
it
won’t
be.
But
it’s
in
sight.
It’s
not
going
to
surprise
anyone
if
it
does
happen.
Thinking
just
to
sort
of
wrap
up
really,
I
mean,
we
got
two
potentially
U.K.
and
U.S.
election
next
year.
Do
they
have
the
potential
to
introduce
some
volatility
into
the
market
and
disrupt
the
higher
market
narrative
that
we’re
anticipating
at
this
point?
Field:
So,
I
think,
the
U.K.
election
probably
less
so.
I
think
if
you
look
at
the
manifestos
of
Labour
and
the
Conservatives
at
this
point,
aside
from
that
kind
of
awful
autumn
statement
that
we
got
back
in
2022,
there
was
nothing
really
that
shocked
the
bond
markets.
So,
I
don’t
think
necessarily
that
a
surprise
in
the
U.K.
election.
And
look,
Labour
have
been,
what,
20,
25
percentage
points
ahead
now
for
quite
some
time
in
the
polls.
So,
I
think
to
a
large
degree,
the
markets
are
very
much
aware
of
the
U.K.
political
situation.
The
U.S.
political
situation
is
a
bit
more
volatile,
shall
we
say,
because
we
don’t
know
exactly
what
kind
of
policies
Trump
would
bring
in
if
indeed
he
returns
to
power
for
another
four
years.
And
from
what
I’ve
been
reading
recently,
the
ramifications
for
the
rest
of
the
world
could
be
huge
this
time,
particularly
given
that
the
world
is
in
a
pretty
precarious
place
with
the
Ukraine
and
Russia
conflict,
that
any
change
to
funding
and
support
in
that
could
lead
to
much
bigger
ramifications
for
Europe
in
particular.
So,
there’s
so
many
knock-on
things
that
could
happen
from
there
that
I
don’t
think
they’ve
been
fully
analysed
and
that
that
will
certainly
shock
the
market.
But
not
necessarily
if
he
gets
elected,
it’s
more
kind
of
what
policies
come
around
after
that,
and
there
could
be
a
series
of
shocks,
I
think,
we
could
be
start
to
worrying
about
at
some
point.
But
–
and
this
kind
of
ties
it
together
really,
I
think
–
but
one
of
the
positives
coming
out
of
the
pandemic
and
the
Ukraine
war
is
that
the
market
hadn’t
really
focused
on
these
tail
risks
as
much
as
it
should
have
over
the
last
few
years.
But
I
think
even
from
looking
at
that
outlook
document
now,
I
feel
like
we
as
an
organization
as
investors
are
way
more
aware
of
the
potential
risks.
And
we’ve
already
started
to
name
them
and
talk
about
the
ramifications
of
them
already.
So,
I
think
just
that
awareness
alone
is
a
very
positive
sign
for
markets
that
at
least
they’re
thinking
about
these
risks
ahead
of
time
and
should
be
less
surprised
if
indeed
one
or
more
of
these
actual
events
happen.
Gard:
Sure.
Yeah.
I
mean,
forewarned
is
forearmed,
and
I
think
investors
in
the
past
have
previously
been
blindsided
by
things
that
maybe
were
likely
to
happen.
So,
the
geopolitical
risk
is
always
with
us.
It
seems
to
be
priced
in
very
quickly
with
markets
and
markets
tend
to
move
on
very
quickly
unless
things
get
extremely
bad
geopolitically.
But
it’s
always
worth
starting
in
the
thinking
what
potentially
could
go
wrong
rather
than
what’s
likely
to
go
right.
Field:
Absolutely.
Gard:
Great.
Well,
thanks
so
much
for
your
time
today,
Michael.
Look
forward
to
catching
up
in
the
new
year
and
we’ll
be
talking
about
earning
season
where
all
the
world’s
biggest
companies
will
say
how
well
they’ve
done
in
2023.
So,
look
forward
to
catching
up
with
you
then.
For
Morningstar,
I’ve
been
James
Gard.
