Home Business NewsBusiness Private investors weather economic storm – but what does the future hold?

Private investors weather economic storm – but what does the future hold?

by LLB Reporter
12th Jul 22 11:56 am

Interactive investor’s latest private investor performance index to 30 June 2022 reflects the challenging first 6 months of the year. Private investors have navigated volatile markets, rising interest rates, looming fears of recession and devastating geopolitical events.

With data now going back two and a half years, the index charts interactive investor’s customer performance data, in median terms*, since the first Coronavirus cases emerged in the UK.

How was it for you?

During that volatile two-and-a-half-year period since ii started tracking customer performance, the average ii customer is up 2.6%, ahead of the FTSE All Share (up 0.7%) and the FTSE 100 (up 1.5%), but trailing the FTSE World (up 8.5%) and the S&P 500 index (up 12.1%). The IA Mixed Investment 40-85% shares sector was up 1.8%. The Nasdaq, home to the world’s technology giants, is up 13.3%, but has had the most pronounced falls more recently.

The IA Mixed Investment 40-85% shares sector is a useful comparison because it reflects a mix of equities and bond fund exposure, not to mention cash, that ii customers will have, on average, in their portfolio.

Levelling with Uncle Sam

Over the past two years, the average interactive investor customer has outperformed global and UK indices, and levelled with the S&P 500 index, up 13.2%. That’s no mean feat – the US market is notoriously hard to beat, or even level with. Tech stocks, using the Nasdaq Index, were up 6.4%.

A tough first half of the year

Although investing is very much a long-term game, and we must not dwell too much on the short-term, it is important to reflect more recent reality.

Private investors are down -11% in the first half of 2022, while the IA Mixed Investment 40-85% Shares sector is down 10.8% The losses echo the falls of H1 2020, when the average ii customer was down -8.1%, before finishing the year in positive territory. There’s no guarantees that will play out again and it’s noteworthy that the H1 2022 falls are more pronounced than in H1 2020.

The Nasdaq was down 21.1% in the first six months of the year, illustrating the torrid time for tech stocks.

In Q2 2022, the average ii customer is down 7.6%. Historically, customers with £1m plus accounts have performed the best since ii started publishing this index; but ii’s wealthiest customers suffered a little more in quarter 2, down -8.4% on average over the last three months.

Richard Wilson, CEO, interactive investor, says: “The past six months have seen a number of markets enter into correction territory as central banks begin to take action to end the longest period of hyper-cheap money, and try to chase down inflation with higher interest rates. This, added to supply side shocks, has created market volatility that we can only expect to continue in the near term.

“Long term investing is about sensible diversification, regular investing and patience that we know in the long run pays dividends. More customers than ever are now using the free ii regular investing service, introduced in January 2020. You cannot time the market but you can benefit from compounding, which remains possibly the most powerful long term investing tool.”

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