Advisers are preparing for increased market volatility in 2026, driven by uncertainty over the global economy and UK inflation.
New research from Wesleyan found that 92% of advisers believe investment markets will be more volatile this year. Uncertainty over the global economy (68%), the rate of UK inflation (61%) and Bank of England interest rate decisions (50%) are expected to be the most significant drivers of volatility, along with new, intensified or enduring global conflicts (42%) and a fall in global technology equities (39%).
More than four in five (82%) advisers believe the Government’s push to build a stronger culture of retail investing in the UK will also make client concerns around market volatility a bigger issue. Additionally, a similar proportion (84%) believe the performance of their clients’ investments is under threat due to market volatility, with more than two fifths (45%) expecting between 20% and 40% of their clients to be put off from investing in growth assets such as equities, bonds or property.
The threat also extends to retirement plans, with 45% of advisers expecting most of their clients at or near retirement to postpone or change their retirement plans as a result.
James Tothill, investment specialist at Wesleyan Financial Services, said: “Market volatility is set to be a defining concern for clients in 2026, and with the Government encouraging more people to invest, advisers will potentially need to help a broader base of people to understand and navigate these conditions.
“Beyond portfolio management, the key will be to help clients maintain their investment discipline and recognise that volatility comes with investing in growth assets.”
The research uncovered a number of strategies that advisers are using to help their clients manage market volatility this year. Client communication is the most common approach, with 60% of advisers planning to discuss what’s driving volatility, what the future outlook could be and what it means for their clients’ money and goals.
Nearly half (48%) will seek further diversification opportunities, such as commodities or private equity. The same proportion (48%) said they will start or increase investments in a ‘smoothed’ fund, which adjusts for market volatility to smooth investment returns, while 41% will advise clients to de-invest from certain sectors or markets.
Tothill added: “We’re seeing growing adviser interest in smoothed funds as a way to help specific client segments manage volatility without sacrificing long-term growth potential.
“Smoothing offers a way to stay invested in growth assets while avoiding the emotional and financial impact of short-term market swings, whether that’s helping clients maintain discipline during uncertain periods or protecting those who simply can’t afford to see significant portfolio fluctuations at critical points in their financial journey.”
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