Novice investors, who started investing in the last 12 months, are three times as likely to react in some way to this short-term event than more experienced investors who have been investing for over a decade, according to new research from St. James’s Place.
Four in 10 (38 per cent) UK investors are planning to make changes to their portfolios following the UK General Election being called – including adjusting their asset allocation, withdrawing funds, making additional investments and diversifying across geographies. Interestingly, novice investors who have been investing for less than a year (62 per cent) are three times more likely to react to this event compared to those who have been investing for over a decade (19 per cent).
SJP’s investor behaviour election poll, which surveyed 1,000 UK investors, found 38 per cent are considering taking action on their investment portfolios in response to the election. Specifically of those taking action, 25 per cent intend to increase exposure to equities, 22 per cent to bonds, while 24 per cent plan to diversify internationally by reducing their UK investments. By contrast, 13 per cent are looking to increase their investments in the UK market.
Encouragingly, the research shows that those making changes are more likely to make additional contributions (33 per cent) rather than withdraw funds (15 per cent).
Meanwhile, only 19 per cent reported decreased confidence in the UK stock market, while 13 per cent reported decreased confidence in their own investments due to the election.
The study also found that newer investors are more likely to react to the election, with 62 per cent of those who began investing in the past year planning to make changes to their portfolio compared to 19 per cent of those investing for over a decade. The 25-34 age group is the most active, with 81 per cent planning to adjust their portfolios and just 12 per cent saying that they will take no action. This compares to 74 per cent of 45–54-year-olds, and 85 per cent of those over 55, saying they will sit tight and take no action at all.
SJP’s analysis of UK market performance data spanning the past 10 UK elections, from 1987, found no clear trends between election outcome and market performance, underscoring the importance of staying invested and not following the noise or trying to time the market in response to short-term events.
The performance prior to, immediately post, and over the duration of each government’s term was on average positive with a very wide range. The only consistent outcome was positive medium to long term performance of the UK equity market. SJP’s findings suggest that major external shocks, such as the 1987 stock market crash, the burst of the dot-com bubble in 2000 and the 2007 financial crisis, have more of an impact in the short term than any political party, with only one government having a negative absolute return over their term, coinciding with the dotcom crash.
