Friday Highlight  

How investors are navigating the UK’s transition out of lockdown

How investors are navigating the UK’s transition out of lockdown
 Andy Rain/EPA-EFE/Shutterstock

Just when we thought the UK was easing out of lockdown, the sudden spike in Covid-19 cases has prompted the re-introduction of certain social distancing measures.

Unlike before, these new measures are coming into force at a time when the government is also attempting to bring about the country’s post-pandemic economic recovery.

The “new normal” is well and truly here, and recent weeks have shown us that the fight to defeat Covid-19 still has a long way to go.

In situations like these, it is important to put things into perspective.

The government naturally fears the financial repercussions that will arise from economic stagnation. That’s why Chancellor Rishi Sunak has been tampering with taxes to promote investment and spending activity. 

Of course, investors will likely be acting with added caution in mind for the foreseeable future.

The number of unknowns (vaccine development timeline, chances of a second lockdown, etc.), along with the performance of different asset classes and markets in recent weeks, shows that there is a mixed outlook for the future.  Some are substantially more optimistic than others.

To explore this further, HYCM recently commissioned research to discover which assets investors are looking to buy and/or sell over the next 12 months.

After surveying over 900 investors, the resulting figures show just how Covid-19 has affected investor’s portfolios – the key findings of which I have analysed below.

An ongoing retreat to cash

At present, the most popular asset class among investors is cash savings.

Of those surveyed, 78 per cent identified as having some form of savings in a bank savings account, followed by stocks and shares (48 per cent) and property (38 per cent).

While not entirely surprising, when viewed in the context of investor’s future investment plans for the coming year, it becomes evident that the majority are taking a cautious approach by reducing their risk exposure. 

Just under a third (32 per cent) said they intend on placing more money into their savings account – by far the most common investment strategy among those that we surveyed.

After this, just over a fifth (21 per cent) plan on purchasing more stocks and shares, 17 per cent intend on investing in property, and 17 per cent are looking to purchase fixed interest securities.

When asked about the impact Covid-19 has had on their portfolios, 43 per cent stated that they had seen their assets decrease in value due to the pandemic.

However, a surprisingly high 73 per cent said they are not planning on making any major investment decisions for the remainder of 2020.

It’s not all about cash 

The figures above show that investors are evidently still concerned about how the rest of this pandemic will unfold. Retreating to cash savings reflects a general desire to reduce risk exposure in the medium-to-short term, even as a number of safe-haven assets report record-breaking gains.