Are investors adjusting to the new normal?

Sunrise

Potential for recovery following Covid-19 and trends which have accelerated as a result of it give many reasons for optimism heading into 2021.

The list of reasons for investor uncertainty heading into 2021 remains long.

A global pandemic. Lockdowns. Volatile markets. Political turbulence. Uncertainty over jobs and the economy. Record levels of government borrowing – and questions over how it will be repaid. Lower interest rates – and talk of them turning negative. Working from home.

Given all this, it’s perhaps unsurprising that investors are now reviewing all aspects of their lives, not just their portfolios. For some, the balance has tipped to early retirement.

A significant number of people are actually bringing forward their retirement date as a result of what’s happened this year. One in four respondents to the Schroders 2020 UK Financial Adviser Survey said they have clients who have done this.

If you’re in that group able to bring forward retirement, that’s great. However, for the rest of us yet to draw down a pension there are many positives to focus on as we head into the new year.

Will UK equities come back in favour?

The idea of UK equities coming back into fashion has long been discussed. However, with Brexit negotiations reaching their denouement it may be about to happen. Financial advisers could be sensing a reversal of fortunes in the not too distant future.

According to our survey there has been a significant change in the number of advisers looking to allocate to UK equities – while 65% have decreased allocations over the last 12 months, 40% are now looking to increase allocations over the next 12 months.

The survey was conducted just prior to the US presidential election and to the Pfizer/BioNTech, Moderna and University of Oxford/AstraZeneca vaccine news. It showed 45% of advisers consider “Recovery from Covid-19” to be a distinct investable theme. So renewed interest in UK equities is perhaps unsurprising, given the market has been one of the major regional market laggards of 2020.

While the response to the recent vaccine breakthrough has helped close this gap, UK equities still remain in negative territory year-to-date, and some way behind other equity markets.

View Full Article – published by Schroders on 16th December 2020