Nearly a quarter of UK investors are reducing their exposure to domestic stocks as political uncertainty takes hold, says trading platform IG.
The firm’s latest biannual Client Sentiment Study found 23% have changed their investment allocation as a result. Among those who have repositioned, the most common approach has been to shift investments from UK markets to international markets (42%), while 19% have increased their cash holdings.
IG said political uncertainty has climbed to its highest level since it began tracking investor sentiment in 2022, with 61% of investors now citing domestic political uncertainty as a key risk to their portfolios.
Almost four in five (78%) investors also believe ongoing political uncertainty will either negatively affect UK stock market performance or increase market volatility over the coming months.
Additionally, IG said domestic political uncertainty is being compounded by a more challenging global backdrop, Almost seven in 10 (69%) investors cited wars and international tensions as a risk to their investments, up from 51% six months ago.
Concern about inflation has also risen to 53%, up from 44%, while worries over high interest rates have increased significantly to 38% compared with 18% six months ago.
Chris Beauchamp, chief market analyst UK at IG, said: “Our latest research suggests political uncertainty is beginning to influence investor behaviour, not just investor sentiment. Rather than simply expressing concern about the outlook, many retail investors are actively reassessing where they want their money invested.
“It’s also important to view these findings in the wider context. Investors are navigating uncertainty on multiple fronts – from domestic politics to escalating geopolitical tensions and persistent inflationary pressures. Together, these factors are creating a more cautious investment environment.
“That doesn’t necessarily mean investors are abandoning risk altogether. Many continue to look for long-term growth opportunities, but confidence in UK markets will depend on greater political and economic certainty over the months ahead.”
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