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Investors bunker down as war and inflation bombard holdings

Investors bunker down as war and inflation bombard holdings

In uncertain times, investors are selling their equity funds, and looking for more defensive assets, such as money-market and multi-asset funds, according to research from advisor, Hargreaves Lansdown.

“Rising inflation, political uncertainty and growing concerns about a global recession has hit investor confidence hard this month,” said Emma Wall, head of analysis and research for the investment platform

The underlying theme for the month has been inflation. Factored in with political turmoil, a hot war in Europe, and signals of global recession Hargreaves Lansdown’s Investor Confidence index has dropped by 10 points this month, down to 57.

UK Investor Confidence chart
UK Investor Confidence

The worst affected market was North America, which fell by 20 points. Confidence in UK economic growth dropped by four points.

Global Sectors Investor Confidence chart
Global Sectors Investor Confidence

Outlook: bleak

Wall said: “Across the globe, central banks are raising interest rates in a bid to stem inflation – but with so much out of policy committee’s control, the immediate outlook remains bleak. The war in Ukraine continues to dominate prices, markets and the economic outlook.”

Over the weekend, Russia and Ukraine signed a deal which would allow grain to be exported from Ukrainian ports which immediately saw wheat prices fall to levels last seen pre-invasion. Yesterday (26th July), Vladimir Putin ordered attacks on the one of the ports, causing wheat prices to rise again – and signalling to the world that the war – and associated political and price uncertainty – is far from over.

Hargreaves Lansdown reported that the most bought funds on its platform this month were money market funds, and multi-asset funds invested for capital preservation, such as Troy Trojan, and the Personal Assets investment trust.

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This article does not constitute investment advice.  Do your own research or consult a professional advisor.

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