On August 26, US Federal Reserve (Fed) chair Jerome Powell held a long-awaited speech in which he claimed that the central bank would continue to raise interest rates to fight off inflation, interjecting that this battle could cause ‘some pain’ to the US economy.
Thus, UK investors are also bracing for a recession before the end of the year, as a new survey of 885 UK-based retail investors commissioned by HYCM shared with Finbold shows. The study showed: that 62% of investors believe that the UK will enter a recession before year-end.
Namely, the survey showed how retail investors manage their portfolios with high inflation, low growth, recession risks, and Conservative leadership contests piling on possible headwinds for the broader markets.
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It also revealed that 50% are concerned that interest rate hikes will not tame inflation; that investors plan to decrease their holdings in crypto, classic cars, and private equity compared to Q1; and that stocks and gold are the most popular assets to invest in.
Headwinds abound
Giles Coghlan, Chief Currency Analyst, HYCM, said that the Conservative leadership contest is currently in the limelight with the greatest focus on economic policy as the fight for the PM position continues. However, the discrepancy betweenSunak’s desire to tame inflation andTruss’ss doubts about the path chosen by the Bank of England (BoE) assures investors that a recession is inevitable.
Coghlan also stated:
“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.”
Further adding:
“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.”
In the end, the risk appetite seems to be alive and kicking despite the challenging macro environment, as the study concluded that 19% of investors’ overall plan is to keep investing in stocks and shares, while interest in forex (currencies) is also stable.
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