Investors believe in opportunities despite recessionary risk, poll shows

interactive investor poll finds two-thirds believe now is a good time to invest, despite biting inflation and other concerns.

• 60% of investors polled between 27-28 October say they are making some changes to their portfolios

Despite a challenging year to date for markets, over two-thirds (67%) of investors believe now is a good time to invest, according to a new poll by interactive investor, the UK’s second-largest direct to consumer investment platform.

While perhaps surprising given the recent direction of markets, it suggests that many see potential value after the heady falls seen so far this year. Only time will tell if they are proved right, but it’s noteworthy that so many people were moved to share their views - some 5,217interactive investor website visitors between the 27 and 28 October responded.

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In the same poll by ii, the largest number of respondents (40%) said the risk of a global recession represents the biggest threat to global stock markets over the next five years.

In a similar investment sentiment poll conducted by ii earlier this year (March), the devastating war in Ukraine was front and centre of investors’ minds. In March, the largest percentage of poll respondents (42%) said that the Russia-Ukraine war and the potential escalation of the conflict was the largest threat to global stock markets.

This time round (October 2022), the impact of the conflict was the third most-cited answer – with 17% answering that it represented the biggest threat to global stock markets in the medium term.

In ii’s latest October’s poll, after the risk of global recession, the second biggest threat to global stock markets, according to ii’s respondents, is believed to be inflation and rising interest rates (18%). Meanwhile, 13% cited geo-political tensions and 7% of respondents believed UK political instability represented the largest threat, during what has been a particularly turbulent few months for British politics.  

2% chose climate change as the most significant risk to global stock markets, despite the UN’s Climate Conference, COP27, due to take place from the 6 November.

In addition, as restrictions continue to ease in most parts of the world, only 1% of the sample believe that new waves and/or new variants of Covid-19 pose a risk to global markets over the same period.

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Despite the plethora of challenges facing investors, many respondents to our survey are optimistic that now is a good time to invest. Only time will tell, and with so many issues for investors to grapple with, there could well be some bumps in the road yet. But certainly, markets look cheaper now than they did at the start of the year. Home bias still seems to be going strong, with more than half of the sample investing their spare cash into UK equities in spite of looming recession risk and the recent bout of political instability in Westminster – and the market mayhem that it reaped.

“While still in negative territory, the UK has performed better than global markets over the year to date. But longer term, global markets have often tended to outperform, showing the importance of having a diversified portfolio.”

Where are investors channelling spare cash? A regional breakdown  

When asked ‘if you are investing spare cash into equities, which regions are you investing in?’ the largest percentage of respondents (57%) said the UK.

The UK was a popular choice among pollsters in ii’s research back in March of this year, as well, getting 58% of the vote, and FTSE 100 dividend payers may be front of mind here.

ii’s October’s poll saw an increase in popularity for the US, with 24% saying this is where they were channelling spare cash. In March, the US got 14% of the vote.

Other regions remain less popular with investors; emerging markets had 5% of the vote, closely followed by Europe and Asia (each with 4%). Frontier markets were the least popular with roughly 1%.

Lee Wild, Head of Equity Strategy, interactive investor, says: “The increase in popularity of US stocks is significant. After all, the Nasdaq and S&P 500 were both inflated in late 2021, but a slump of more than 20% in 10 months is potentially a huge opportunity for long-term investors.

“Nevertheless, with the threat of recession looming, investors are right to drip money into the market regularly. This strategy works well in a falling market, and investors reap the rewards when stability and recovery return.”

Most investors are making portfolio tweaks

More investors appear to be tweaking their portfolio in response to the ongoing market turbulence. Some 60% of respondents said they are making some changes.

The belief that now is a good opportunity to invest appears to be manifesting itself at the portfolio level, with 25% of respondents saying they are increasing their stock market exposure; 13%, meanwhile, are doing the opposite and selling.

14% say they are re-allocating money to more defensive sectors, and 5% are turning towards alternatives with their investments. The least popular option was reallocation to funds with an absolute return mandate – just 3% said this was how they were adjusting their portfolio at the moment.

However, some investors are sitting tight; with 40% stating they are leaving their investment portfolio alone.

Jobson adds: “The mantra – ‘keep calm and carry on’ can be a good approach amid periods of heightened market volatility. If you don’t need to sell, waiting until the dust settles and then checking that your investments are still aligned to your long-term goals could prove prudent.

“Ideally, even when markets are rough it is still worth keeping your money invested – that is, of course, for those who can afford to do so. It’s also a reminder to take a closer look at asset allocation to ensure a balance of assets.

“Nervous investors can drip feed investments monthly to help smooth out the inevitable bumps in the market, buying fewer shares when prices are high and more when prices are low – a process known as pound-cost averaging.”