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Economic uncertainty leads investors to dump equities

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Economic jitters have led to knee-jerk reactions from investors in June 2022, who on a deluge of mediocre economic news have been clamouring for safe havens and been selling out of equities as they rebalance their portfolios, according to research from the Investment Association.

The research revealed that investors took around GBP4.5bn out of funds in June 2022, the highest monthly outflow of the year so far and the second highest on record.

Emma Wall, head of investment analysis and research, for investment advisor, Hargreaves Lansdown, said: “Ever rising inflation, the continued atrocities in Ukraine, and Central Bank rate hikes across the world have all knocked investor confidence in June – leading to fund outflows of GBP4.5bn. This is the worst figure so far this year – and the second worst monthly outflow on record. “

The data reveals that equity funds saw the largest outflows of GBP2.3bn. However, one beacon in all the darkness was that responsible investment funds bucked the trend to take GBP71m in June.

Equity funds unpopular

Equity funds were the least popular sector, as investors sought to reduce risk amidst the uncertainty. Global funds, which have been extremely popular over the past five years, were the worst hit.

Multi-asset funds also suffered, though those that target volatility were in inflow mode – one of the very few sectors attracting cash as investors prepare for yet more market jitters.

Wall pointed out that Hargreaves Lansdown’s July fund flow tables for clients show that some optimism has returned in the last month, as markets regained some earlier losses, particularly tech and US markets.

“However, the most bought funds also included those with a focus on capital preservation showing that confidence remains low, and investors are steeling themselves for a bumpy ride,” she said.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

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