Four in 10 UK investors will make changes to their portfolios as a result of the General Election being called, according to research from St James’s Place (SJP).
Changes being made include including adjusting asset allocation, withdrawing funds, making additional investments and diversifying across geographies.
SJP also found the level of experience investors had played a role in their decisions. Novice investors, who started investing in the last 12 months, were three times as likely to react to this short-term event (62%) than more experienced investors who have been investing for over a decade (19%).
The wealth management firm surveyed 1,000 UK investors to compile the research.
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Of the investors taking action, 25% intend to increase exposure to equities, 22% to bonds, while 24% plan to diversify internationally by reducing their UK investments. Only 13% are looking to increase their investments in the UK market.
Researchers also found that those making changes are more likely to make additional contributions (33%) rather than withdraw funds (15%). Meanwhile, only 19% reported decreased confidence in the UK stockmarket, while 13% reported decreased confidence in their own investments owing to the election.
The 25-34 age group was most likely to make changes with 81% planning to adjust their portfolios and just 12% saying that they will take no action. This compares with 74% of 45–54-year-olds, and 85% of those over 55, saying they will sit tight and take no action at all.
SJP said its analysis of UK market performance data spanning the past 10 UK elections, from 1987, found no clear trends between election outcome and market performance.
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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 stockmarket 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.
Joe Wiggins, investment research director, SJP said: “Our research into market behaviour shows that political events such as General Elections have limited impact over the long-term. Therefore, while any period of political change can cause investors to worry, it is important not to become overly distracted by short-term noise.
“It is encouraging to see that very few respondents were looking to react to current events by withdrawing their investments, but It is important to remember that timing the market also applies to adjusting our asset allocation. High profile events can often tempt us into injudicious trading decisions, and this is something we should look to guard against.”
