No matter the outcome, the majority seem to think that a significant economic downturn is inevitable, as 62 per cent say the UK will enter a recession by the end of the year.
When it comes to their portfolio management, it is therefore unsurprising to see that 56 per cent of investors describe themselves as risk-averse.
In practice, this means that many are keeping with tradition – avoiding speculative risk assets and investments with low liquidity in favour of safe havens like gold as high inflation bites into their spending power.
For example, 33 per cent of investors said that they plan to decrease their investments in cryptocurrencies compared to Q1 figures. In light of crypto’s propensity for market crashes and extreme volatility, this is not exactly surprising. However, it suggests that the likes of bitcoin are perhaps not the 'new gold' or inflationary hedge that many once thought.
Luxury items like classic cars are another asset class that investors are shunning, with 44 per cent looking to decrease their holdings compared to Q1 figures, presumably to liquidate their investments to help with everyday expenses.
Likewise, many investors appear to be shedding potential risk from private equity firms, as 35 per cent plan to decrease their investment compared to 11 per cent in Q1.
Stocks and safe havens
Despite the impact that reduced consumer spending can have on company profits, stocks and shares remain the most popular asset amongst investors in the current climate.
Nineteen per cent plan to invest in stocks and shares within the next 12 months, while the number of investors with stocks and shares investments has actually grown by 5 per cent since Q1. Indeed, this could suggest that investors are preparing to buy the dip that the recession may create, in order to profit from a market recovery later down the line.
Equally, safe haven assets have not lost their shine. Known for low volatility and consistent returns, these investments – including real estate and precious metals – are regularly used by investors in the midst of a recession.
As these assets tend to maintain or accrue in value, 14 per cent intend to increase their property investments within the next 12 months, while a further 12 per cent plan to pivot towards gold and other precious metals.
Looking ahead
While it is difficult to predict exactly how the next few months may pan out, news of an impending recession will weigh heavily on investors’ minds.
While there are still opportunities to be had in the current economic state of play, reducing risk will be crucial for many in the months ahead, and investors must make decisions based on their personal situations and develop a strategy that best suits them.
