UK retail investors hold their nerve despite rising inflation, commodities and Ukraine war raging on
UK retail investors have remained composed in the face of the Russia-Ukraine conflict, despite significant concerns about future implications of the crisis on the financial markets, international relations, and the environment.
Only 14 per cent of investors monitor the conflict between Russia and Ukraine when thinking about their investment strategy.
The same number said they were concerned about the risk of a wider conflict and were investing more carefully as a result, while even fewer (10 per cent) have made changes to their portfolio in light of the intervention, according to new research shared with City PM today.
Despite this inaction, the research by HYCM showed that the majority are taking a moral stance on the conflict, as 67 per cent of investors believe consumers and investors will boycott companies who continue to do business with Russia.
This figure rises to a sweeping majority (87 per cent) amongst those with portfolios in excess of £250,000.
Inflation
To guard against inflation, 37 per cent pledged to increase their investment in ‘safe haven’ assets, while 25 per cent stated that they will increase their investment in defence stocks and cyber security should the war develop into a protracted conflict.
Elsewhere, 44 per cent said they will reconsider their investments that have exposure to Russia or companies that support its actions.
“Two months on since Russia sent troops into Ukraine, news bulletins predicting prolonged aggression with ruinous consequences for the global economy have dominated the media,” said Giles Coghlan, Chief Currency Analyst at HYCM.
Coghlan told City PM that “if the headlines foretelling chaos in the markets are to be believed, one would be forgiven for thinking that investors have been rocked by the crisis and left scrambling to protect their portfolios. That this is not the case.”
“Despite ever-mounting concerns over inflation, commodities, and the prospect of wider conflict, retail investors have held their nerve so far.”
Giles Coghlan
“While they clearly hold strong views about the sanctions placed on the Russian economy and the various possible scenarios that could unfold, many are shutting out the din of current events as far as their strategies are concerned.”
“Rather, the vast majority appear attuned to the bleak reality that the market reaction to these events can be surprisingly mild. Indeed, when a crisis is staring us in the face, sometimes switching off the news is the wisest option,” Coghlan concluded.
Looking ahead
Looking to the future, the majority (69 per cent) believe the conflict will bring about permanent changes to international trade and investment flows between Russia and the West.
When asked about the ESG (environmental, social, and governance) in relation to the conflict, half (50 per cent) raised concerns that the intervention will set ‘net-zero’ goals back.
A further 9 per cent believe that stocks in the defence industry should now be considered legitimate ESG investments, with this sentiment garnering the most enthusiasm amongst those aged 18-32 (20 per cent) and those with the largest portfolios (17 per cent), respectively.