British investors are rapidly dumping shares, following Brexit.
Last month, British investors withdrew a record £1.9 billion from stock market funds as savers’ fear increased despite increasing markets.
The amount taken out was far greater than what was done in July 2016, days after the Brexit referendum alarmed investors and caused the FTSE 100, Britain’s benchmark index, to plunge sharply.
According to data firm Calastone, investors withdrew £2 billion from funds in the first 17 days of August, ostensibly collecting profits while British stocks advanced 1.1 percent. When investors stayed put for a fortnight after that, the markets fell by 3.4 percent, despite some brave savers reinvesting £100 million.
Despite the fact that cash savings rates are still much below inflation, savers have pulled more than £4 billion out of accounts this year. The consumer price index reached a 40-year record high in July. It will probably rise to 13 percent by the end of the year. If energy prices continue to rise, according to Goldman Sachs, it may almost treble to 22 percent by 2023.
Investors have nonetheless turned to cash and other safe havens. All stock markets saw withdrawals of capital, but according to Calastone, British funds were the most hit. They lost £759 million last month. Following North American funds, there were £426 million in outflows.
“Green” funds, which avoid polluting equities or focus on businesses with excellent environmental, social, and governance records, defied the trend and attracted £95 million in new capital. This was the lowest monthly amount in nearly three years, suggesting that interest was starting to decline.
Savings were invested in bond funds, bringing £820 million to managers with a fixed income focus. When markets are choppy, investors frequently resort to high-quality bonds.
The Calastone’s Edward Glyn, however, cautioned that exiting a bear market—when equities are often falling—often worked against investors’ interests. It meant they would miss out on returns during the rebound. He claimed that although trying to time the market is frequently a bad idea, UK investors may have pulled off a brilliant maneuver by leaving the ship just as the bear rally reached its apex.
“Markets are factoring in the possibility that inflation may be very harmful and enduring, which means that interest rates will remain high for longer than previously anticipated. A weaker economy coupled with higher rates has a highly detrimental impact on stock values.
The value of the global stock market has decreased by 5% so far in 2018. The FTSE 100 has done better, although within the same time span it was still down 3%.
