Confidence Amongst UK Investors Set To Improve, Market May Have Bottomed – eToro

A third of UK retail investors have reduced the amount they invest in response to the cost-of-living crisis and worsening confidence in the economic landscape.

However, investing levels look set to pick up during the fourth quarter. That’s according to a report from social investing network eToro.

Its quarterly Retail Investor Beat report surveyed 10,000 investors across 13 countries. And it showed that 33% of British retail investors have recently cut back on investing.

Almost a fifth (19%) of respondents said they have reduced their investing budgets to help them cover increasing household bills. And 12% said they cut spending in order to build up an emergency fund.

Record Low Confidence

Confidence amongst British investors was “significantly dented” in the third quarter, eToro says. In fact the number of UK respondents who were confident in their investments dropped from 73% to 60%.

This was a record low for the report.

“The main driver of the confidence crisis amongst UK investors is the state of the UK economy,” eToro notes.

Economic conditions in Britain are seen as the biggest risk to 25% of British retail investors, the report shows. This was followed by the threat of a global recession and rising inflation. Some 21% and 20% of respondents respectively cited these as the greatest dangers.

Is The Tide Turning?

However, eToro’s research indicates that investors are becoming more optimistic as we approach the end of 2022.

It showed that just 24% of those surveyed plan to invest less during the fourth quarter. More than three-quarters plan to either spend the same or more in the next three months.

“[This indicates] that UK retail investors are feeling less bearish about quarter four than quarter three,” eToro says.

Taking A Long-Term View

The latest report also indicates that “the majority of UK retail investors have a long-term mindset,” eToro notes.

Two-thirds of its respondents look to hold an individual investment “investment for a time frame of years or decades,” it says. This compares with just 3% who simply hold investments for a matter of days.

Has The Bottom Been Reached?

Commenting on the data, Ben Laidler, global market strategist at eToro, says that “confidence has unsurprisingly taken a real hit in the last year, yet it’s admirable that the majority remain positive, something which speaks to the resilience of this group.”

He adds that the recent slump in investor confidence could possibly suggest that the market has now bottomed.

“If confidence levels are already very low then investors are less likely to be surprised by further bad news, and even a little bit of good news can go a very long way in driving renewed market interest,” Laidler said.