The survey questioned more than 750 UK investors who owned portfolios worth more than £25,000 (€29,527), apart from other savings, residential property and pensions.
Some 47% of investors were happy with their portfolio performance in the past year, while just 40% were optimistic about their investments’ prospects in the next year.
Soaring inflation, ongoing geopolitical conflicts and the UK’s current uncertain economic and political situation were all highlighted as the key reasons for portfolios performing disappointingly so far.
Some 32% of investors revealed that higher interest rates had contributed to their portfolios decreasing, whereas 45% of the investors surveyed cited sticky-high inflation as a concern for managing their portfolios.
The Bank of England’s interest rate increased from 0.25% in December 2021 to 5.25% in August 2023, with rates staying steady at this level until present.
On the other hand, inflation in the UK seems to be stabilising, with May’s inflation figure coming down to the Bank of England’s target of 2%, down from April’s 2.3%.
Regarding the new research, Ben Nichols, interim managing director of RAW Capital Partners said, “Our research clearly illustrates the impact that recent economic and geopolitical turbulence has had on investors in the UK. Many are struggling to adapt to political uncertainty and macroeconomic trends like high inflation and interest rates- the result is that less than half are happy with how their investments have performed in the past year. ”
UK political climate could be further dampening portfolios
The economic and political situation in the UK, especially in the run-up to the 2024 general election also significantly contributed to market turmoil. 57% of respondents also felt that that the worldwide economic and political landscape this year has been more volatile than any other year in the last decade.
This, in turn, is curbing investor confidence, pushing them towards a more cautious and restrained investment outlook. Some 38% of investors said that this global instability, as well as geopolitical conflicts have led to them changing or adjusting their strategies in the last year.
Nichols also said, “We are by no means out of the woods when it comes to geopolitical conflict and economic headwinds, so it is important that investors continue to protect their portfolios against market volatility by assessing which asset classes and investment tactics can best enable them to achieve their long-term financial goals.
“Drawing on the benefits that diversification in non-correlated asset classes can provide will continue to reap rewards.”
Labour's victory in the UK general election could possibly bring some relief to investors, with the hope that markets may stabilise over the next few months, although some regulations are likely to change.
The Labour party has pledged to increase UK investment, as well as stabilise the economy with more stringent spending rules.
AJ Bell investment director Russ Mould also has faith in the resilience of the UK economy, saying “A study of all sixteen of the general elections since the inception of the FTSE All-Share in 1962 shows that the UK stock market is by no means frightened of a change in government and it may even welcome it.
“On average, the FTSE All-Share has recorded a double-digit percentage gain in the first year after an election which sees one prime minister ejected from office and a new one ushered in. There are also greater gains when a government changes relative to when it remains the same.”
