How will it weather current inflationary volatility?
A new survey of 885 UK-based retail investors has revealed how investors are managing their portfolios in light of high inflation, low growth, subsequent recession risks and the Conservative leadership contest.
The new retail investor survey found:
- The majority (62%) of investors believe the UK will enter a recession before the end of the year, irrespective of the outcome of the Tory leadership contest
- Investors showed a slight preference for Rishi Sunak as PM (36%), compared to 31% who favor Liz Truss and 33% who have no preference
- 50% are concerned that interest rate hikes are not enough to tame inflation, posing the biggest threat to their portfolios
- Investors plan to decrease their holdings in crypto (33%), classic cars (44%), private equity (35%) compared to Q1 figures
- Stocks (19%) and gold (12%) are among the most popular asset classes to invest in overall
UK investors are bracing for a recession before the end of the year, new research commissioned by HYCM has found. The trading broker commissioned an independent survey of 885 UK-based investors, all of whom have investments in excess of £10,000, excluding the value of their residential property and workplace pensions.It found that the majority (62%) believe the UK will be plunged into a recession before the year’s end, despite the outcome of the ongoing Conservative party leadership contest. With economic policy a divisive factor between candidates, investors showed a slight preference for Rishi Sunak as Prime Minister (36%), compared to 33% of those who showed no preference and 31% who favor Liz Truss for the role.
In the current high inflation, low growth economy, half (50%) showed their concern that the Bank of England’s interest rate hiking cycle will not be enough to stamp out soaring inflation in the coming months, posing the biggest threat to their financial portfolio. A further 45% expressed their alarm over the prospect that interest rate hikes will dampen economic growth, which they predict will trigger a recession in the next 12 months. That said, 27% of forex investors are looking to increase their FX investment over the next 12 months, as central banks hike their base rates at different paces.
Seeking Safe Haven
Elsewhere, in the current economic climate, more than half (56%) describe themselves as ‘risk averse’. Meanwhile 38% said that safe haven assets were their prime focus in the current investment landscape. When asked about their investment strategy for the rest of the year, 33% of crypto investors plan to decrease their investment, up from just 11% in Q1. However, it is also noteworthy that 27% of crypto investors are planning to increase their crypto holdings. This mixed picture perhaps reflects the growing acceptance of crypto as an asset for the medium to longer term.
Meanwhile 44% and 35% of investors plan to reduce their holdings in classic cars and private equity, up from 14% and 11% in Q1, respectively. On the contrary, stocks and shares were the most popular asset class amongst those surveyed, with 19% overall planning to invest in this asset within next 12 months, with property (14%), social and impact investments (13%) and gold (12%) following closely behind.
Giles Coghlan, Chief Currency Analyst, HYCM, said: “With the Conservative leadership contest gaining momentum, all eyes are falling firmly on economic policy in the bid for the prime minister role. As Sunak warns that the lights are flashing red on the economy and urgent action must be taken to tame spiraling inflation, Truss and her backers are casting doubt on current thinking from the Bank of England (BoE). Whatever course is taken, our research shows that investors clearly view a recession as inevitable.”
Heeding warnings of a five-quarter economic decline, our findings suggest that investors are not only acutely aware of the prolonged impact of the current economic crisis, but they are also questioning the BoE’s mandate on inflation and adapting their portfolios for a difficult road ahead. As the cost-of-living crisis continues to bite, it is therefore unsurprising to see many investors reducing their holdings in some riskier and more speculative assets in favor of those that characteristically provide a safe haven in times of uncertainty.
“However, given that 19% of investors overall plan to invest in stocks and shares and interest in forex remains high it is important to acknowledge that, although subdued, risk appetite is not entirely dead,” Coghlan said.
About HYCM
HYCM is an online provider of forex and Contracts for Difference (CFDs) trading services for both retail and institutional traders. HYCM is regulated by the internationally recognized financial regulator FCA. HYCM is backed by the Henyep Capital Markets Group established in 1977 with investments in property, financial services, charity, and education. The Group via its relevant subsidiaries have representations in Hong Kong, United Kingdom, Dubai, and Cyprus.
High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information, please refer to HYCM’s Risk Disclosure.
*Any opinions made in this material are personal to the author and do not reflect the opinions of HYCM.
About The Research
The market research was carried out between 29th July and 2nd August 2022 among 2,000 UK adults via an online survey by independent market research agency Opinium. Opinium is a member of the Market Research Society (MRS) Company Partner Service, whose code of conduct and quality commitment it strictly adheres to. Its MRS membership means that it adheres to strict guidelines regarding all phases of research, including research design and data collection; communicating with respondents; conducting fieldwork; analysis and reporting; data storage. The data sample of 2,000 UK adults is fully nationally representative. This means the sample is weighted to ONS criteria so that the gender, age, social grade, region and city of the respondents corresponds to the UK population as a whole. Within this sample, 885 respondents had investment portfolios worth in excess of £10,000 – this includes all assets from bonds and currencies to commodities and stocks and shares, but excludes any savings, pensions or property that is used as their primary residency.
