Investors are opting to stay invested when volatility strikes, despite a sharp decline in market confidence, according to Fidelity International.
A study of 1,000 retail investors by Fidelity in February and again in mid-April, found twice as many investors (41%) were ‘pessimistic’ in their outlook for the stock market since before the tariff announcements were first made (24%).
Similarly, the number of investors who describe their market outlook as ‘optimistic’ has fallen from 43% to 28%.
Fidelity said almost half (45%) of investors are concerned about how tariffs will impact the value of their investments and overall financial situation, while 34% are worried about the geopolitical environment more broadly. Four in 10 (40%) are worried about the impact of these tensions upon the strength of the UK economy specifically.
Against a backdrop of economic ups and downs, more than a quarter (28%) are concerned about how continued market volatility might impact them.
When asked how they might respond to market shifts, a fifth (19%) of investors say they would consider selling their investments but would ultimately wait to see how things develop, while 16% would seek advice from a financial adviser.
The same number (16%) said they would look for opportunities to invest in alternative sectors or regions when uncertainty strikes, while a smaller number (14%) would reduce their exposure to volatile markets over time and 7% would choose to sell some of their investments in the affected areas.
However, investors are most likely to focus on their long-term goals, with 42% saying that volatility does not affect their investing behaviour and they would continue with their existing strategy.
Ed Monk, associate director at Fidelity International, said: “The world looks very different today than it did just two months ago. Investors have had to become used to whipsawing markets that move on each new tariff development. Many will be nursing losses and that is showing up with much higher levels of pessimism today than was the case in February. While that’s understandable, it is important investors stick to their long-term plans and remind themselves of their original case for investing. Markets tend to recover in the longer run and, more often than not, it pays to stay the course.”
Fidelity’s research also highlighted stark differences between February and April around which markets present the best buying opportunities. The number of investors looking towards the US as a buying opportunity has fallen from 32% to 18%, with the appeal of the UK also declining from 45% to 40%. Sentiment towards Emerging Markets remained broadly similar at 14%, while the appeal of European markets, excluding UK, has increased marginally from 14% to 16%.
Attitudes towards sector opportunities have changed too. In February, investors were most likely to turn towards technology (31%), with this dropping more recently to 25%. In contrast, when asked to consider which assets hold the most appeal for the year ahead, investors were most likely to opt for gold (28%) in a sign they are seeking safe havens.
Monk added: “Since the February highs, global equity markets have taken a notable hit. The S&P 500 is now 14% below its peak, driven by concerns about changing economic policy in US and falling appetite for high-growth stocks, particularly the so-called “Magnificent Seven” tech giants.
“In the longer term, questions are being raised about the sustainability of a bull market which has been running for 16 years since the financial crisis. That puts the current positive run almost on a par with the two big post-war bull markets of the 1950s and 1960s and then the 1980s and 1990s.”
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