MoneyWeek Interviews: Sue Noffke, head of UK equities at Schroders

Ahead of the MoneyWeek Summit on the 29th of September, we wanted to bring you a series of interviews with some of our favourite fund managers, both those who will be attending the summit and those who aren't. 

In this interview MoneyWeek’s Deputy Digital Editor Rupert Hargreaves sat down with Sue Noffke, head of UK equities at Schroders, to discuss the current situation in the UK market and opportunities for income as well as growth investors. 

We hope you enjoy the interview and if you've not already you can buy tickets for The MoneyWeek Summit at https://www.moneyweeksummit.com/. 

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

 Sue Noffke, Head of UK Equities at Schroders 

Transcript extract 

Rupert Hargreaves: Well, welcome Sue, thank you for joining us. 

Sue Noffke: Delighted to be here.

Rupert Hargreaves: UK equities. They are… hated the world over. Perhaps you could put it that way. What are your views?

Sue Noffke: I think the silver lining in being the Millwall of global stock markets is no one likes us and we don't care. There's a plethora of valuation opportunities right across the market which is fantastic for me as a stock picker, but it's also really interesting for people thinking about investing for the first time or adding money to their investment portfolios because valuation starting points are a real driver of future returns. So the fact that valuations are low gives you quite a good starting point for eventual returns. 

Rupert Hargreaves: What about risks though? Obviously, a lower valuation does discount some risk, but what are the major risks really here for UK investors? 

Sue Noffke: So domestic retail investors and international investors definitely see risks to the UK economy. They see risks from politics, still a lot of overhang of brexit, a lot of upheaval around a change of government, slowing of the UK economy. So there was much debate and fear that we were going to slip into recession after last Autumn's mini-budget and that pushed up bond yields. And we've seen the tightening in Bank rates. The fact that we haven't had a recession, we've actually had better economic growth, has not taken recession risk off the table. In fact, people are still fearful of that in the future. 

So these are the main risks. There's also currency risk, so we saw Sterling fall very sharply in the Autumn of 2022 and it recovered quite nicely in 2023, but that level of volatility has created residual fear factors. Then we've got interest rates and a lot of people whether they're with a mortgage, or without a mortgage, haven't seen interest rates this high for a long time. And the speed with which interest rates have moved is likely to come with some problems. So waiting to see how that transpires. 

The rise in interest rates though, has been a global phenomenon so the question is what's different about the UK? I think the angst is around the stock market and the lack of exposure to technology. We've seen technology fly, especially in the United States and people look at where's the UK's Apple? Well maybe that was ARM but that's gone to float in the US. 

There's been a lot of thinking and a lot of talking about what initiatives can policymakers do, and over the spring and summer, we've seen a lot of ideas come out and much of those have been part of the Autumn Statement to be enacted. For example, some of the ideas that could take place are for pension pots of money to be allocated to different areas of the market. So a little bit more risk-taking. By taking risks you would hope to get a return, that's the way investing works. And moving down the the market cap spectrum to some smaller companies for example to invest more money into those, they typically are faster growing. Some of those might be in the biosciences area or the fintech area which the UK economy plays to pretty well and that could be a spur for investment in the UK I think more kind of realistically a nearer term what could be a catalyst to get people looking back at UK equities – they know they're cheap – but what could give them confidence to put some money to work would be a settling down of bond yields. Now the rise in bond yields has been a global phenomenon but the UK's been at the sharp end of that. 

So there's been much more volatility to the upside and we did see some extreme moves both last Autumn and also in June when inflation printed quite hot in the UK and people moved their expectations of interest rate peaks to 6.5%. 

Now that seems quite high and since then we've seen a little bit of cooling in the employment market and in leading indicators called purchasing managers indices. So actually we've moved to bad news as good news for for markets because softer economic data means that we don't have to go as high on interest rates and that means that the pain is going to be more shortlived rather than pretty messy. 

For the rest of the interview, watch the video above.