Over the last few weeks, we have seen an ever-worsening cost of living crisis, lower economic growth expectations and the ongoing conflict in Ukraine. However, it would appear from a recent report by financial research house HYCM that UK investors are remaining surprisingly composed.
Execution-only investors holding their nerve
While those with funds under discretionary management may have seen some changes in light of the Ukraine crisis, it would appear that execution-only investors have remained resolute. A recent report by HYCM has cast a fascinating light on the current strategy and opinion of investors:-
Ukraine crisis
Only 14% of execution only investors have been monitoring the Ukraine crisis in relation to their investment decisions. A further 14% are taking more care regarding investment moves amid fears of an escalating situation. Surprisingly, just 10% of investors have made any material change to their portfolios due to the Russian invasion.
While many people accuse investors of investing without morals, a staggering 67% of execution only investors expect a boycott of companies linked to Russia. This figure increases to more than 80% for those with portfolios over £250,000.
Cost of living crisis
It is fair to say that the Internet encourages and provides a whole range of information for execution only investors to consider. Consequently, it is no surprise to learn that 37% of those polled expect to increase their exposure to "safe haven" assets in the short term. In addition, the Bank of England recently confirmed inflation will soon hit 8% and could top 10% by the end of 2022. This has prompted another increase in base rates, which has tipped many execution-only investors towards "safe assets".
On a side note, the Bank of England also confirmed that base rates are expected to hit 2.5% by mid-2023. While a valuable means of tackling inflation, the impact on economic growth could prompt more investors to look towards defensive sectors.
Future investment strategies
If the Ukraine crisis is prolonged, there is also a growing appetite (25%) for defence stocks and cyber security investments. Indeed, when asked, 44% of investors said they plan to reconsider their exposure to Russia and companies supporting the conflict. In what many see as a repeat of the "Cold War", 69% of investors questioned believe that the Ukraine conflict will change international trade/investment flows between the West and Russia.
Trading in volatile markets
It is important to consider the value of low latency execution when looking at trade execution services. Here at GIS UK Ltd, we offer Direct Market Access (DMA) which allows trade execution direct with market order books. While many of us take low latency execution, i.e. prompt speedy trading services, for granted, this element of trade execution requires continuous investment.
Prompt trading is obviously important, but this must be supported by clearing services and safe custody operations. So again, these are areas in which we are continuously investing significant funds, allowing us to remain one step ahead of our competitors.
Are investors growing immune to shocks?
While sometimes challenging to look back to the past with an open mind, would investors have been so relaxed if the current situation occurred in the 1980s? The heady mix of inflation, reduced economic growth forecasts, and the invasion of Ukraine by Russia may have prompted a different reaction. Was the media more influential before the Internet revolution?
Whether investors have been coerced into thinking the cost of living crisis and the Ukraine conflict will be short-lived remains to be seen. However, at this moment in time, private investors acting on an execution-only basis appear to be holding their nerve.