UK-based retail investors fully expect and are preparing for the UK to enter recession, for inflation to continue to impact their investments, and are looking for safe haven assets, a new survey by HYCM has found.
The trading broker surveyed 885 investors and said half (50%) had shown concern that the Bank of England’s interest rate hike will not be enough to dampen soaring inflation in the coming months, posing the biggest threat to their portfolio.
A further 45% expressed alarm over the prospect that interest rate hikes will hold back economic growth, which they believe will trigger a recession in the next 12 months.
More than half (56%) of investors described themselves as risk averse in the current environment, while a further 38% said that safe haven assets were their prime focus.
Looking ahead, 33% of crypto investors said they plan to decrease their investment, three times the 11% who said the same in the first quarter.
Meanwhile, 44% and 35% of investors plan to reduce their holdings in classic cars and private equity respectively. In contrast, stocks and shares were the most popular asset class, with 19% planning to invest in this asset within the next 12 months, followed by property (14%) and social and impact investments (13%).
The survey also looked at who investors would like to see win the Conservative leadership race, with 36% showing a preference for Rishi Sunak, compared to 33% who showed no preference and 31% who favoured Liz Truss.
Giles Coghlan, chief currency analyst at 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. 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 Bank of England’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 favour of those that characteristically provide a safe haven in times of uncertainty.”
Coghlan added: “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.”
