A recent poll by UK investment platform interactive investor shows that investors are diversifying away from the UK amidst currency concerns.
Brexit uncertainty coupled with a possible general election hasn’t helped either.
Some 41% of investors polled in August said they have an investment strategy in place and are sticking to it, despite the ongoing Brexit uncertainty. This is down from 53% in March, suggesting that investors are feeling less certain about the best course of action.
In addition, there has been a notable fall in investors deciding to filter out market ‘noise’ and take a long-term view – 23% in August compared to 32% in March.
In August, 18% of respondents said they would not invest until a firm decision has been made on Brexit – but this was down seven percentage points from 25% in March’s poll and significantly lower than 31% in January’s instalment and 38% in December 2018.
Meanwhile, almost one in four (24%) respondents said they’re holding less UK exposed stocks over fear of what would happen to the pound if Britain leaves the 28-nation bloc without a deal.
“The UK investment market has been buffeted by the ongoing Brexit uncertainty and the prospect of a no-deal Brexit appears to have further soured investors’ appetite to the region.”
Myron Jobson, personal finance campaigner, at interactive investor says: “The UK investment market has been buffeted by the ongoing Brexit uncertainty and the prospect of a no-deal Brexit appears to have further soured investors’ appetite to the region. Fewer investors are sticking with their strategy and are increasing their weighting to companies with less exposure to the UK over fears of how Brexit will affect the value of sterling.
“We have seen an uptick in the number of investors investing in gold, as fears over how stock markets will be affected by Brexit if, and when the October 31 deadline is met takes hold. The problem is that amid volatile stock markets, it’s difficult for investors to know how and when to invest. This is understandable, but also provides opportunities for contrarian investors willing to ride out volatility in the short-term. Investors need to have clear goals and a diversified portfolio and it’s important to take a long-term view.”
Ricky Chan, director and chartered financial planner (CFP) of IFS Wealth & Pensions has found his clients are asking more questions regarding their investments: “We’re seeing more clients asking question about how Brexit would impact their investments, and what happens post-Brexit. The truth is, as we tell all our clients, that it’s important to stay calm as no one knows what post-Brexit looks because the government has not even arranged a deal with EU, and if Brexit would even happen at all. As we have just seen from the MP’s motion vote on 3rd September, it’s likely that MPs would not allow the government to leave without a deal.”
Fleeing to ‘safe havens’?
Chan says that some of his clients are asking whether their investment portfolios should hold more commodities, such as gold and cash temporarily.
“Although gold does provide some shelter in times of uncertainty, it is a very volatile asset class with no interest/dividend payments. So, although it may make sense to hold some in a well-diversified portfolio, it does not make sense for it to represent a significant part of the portfolio. It is also not a good idea to time the market, as you’d have to get it right twice – timing on the ideal time to sell and timing on the ideal time to re-enter the market position, which most investors will not succeed.”