This latest instalment was conducted online between 4 May and 13 May 2022, meaning it did not capture the recent interest hikes from the Federal Reserve.
Fed confirms aggressive inflation mandate with biggest interest rate hike since 1994
The results revealed that concerns about overall returns and the rising cost of living were having the biggest impact on investor sentiment at present, which has tipped to a majority bearish stance (57%). Back in the last instalment in November 2021, only 12% reported that their clients were bearish with the majority (41%) holding a bullish outlook. This has now dropped to just 7%.
In the section covering long-term trends, advisers had also revised their growth expectations down from the previous study, with 41% of them saying they expect equity returns to be lower than historical averages over the next five years, down nearly 20% on November’s results.
Expectations for higher volatility, rates and inflation and more disruptions from geopolitical issues had increased, with the latter pushed up by the war in Ukraine and the global response to Russia’s invasion.
Near term, these were not the biggest concerns among clients, although they all likely contribute to it.
Capital loss was the biggest risk advisers reported from their clients (60%), surpassing rising inflation and interest rates.
Doug Abbott, head of UK intermediary at Schroders, said that this was an interesting result given how much noise there has been in markets regarding the latter two topics.
He said that the results may have been slightly skewed by the demographics of the clients, “which are probably older, they are probably wealthier, they are probably less impacted by things like mortgage rate increases”.
Still, he said that the fears around capital loss were not mutually exclusive to interest rate and inflation factors, since they partially drive concerns about levels of returns.
“All these things are slightly interrelated,” he said.
Another key statistic from the survey are the real implications the cost of living crisis is having on investments.
Bank of England rate rise only pushing problems further down the line
69% of the respondents said that their clients will have to adjust their investment plans due to the cost of living crisis.
Abbott said that the crisis is “reducing people’s ability to save because people are spending more every month”.
Rising prices are challenging how far many will be able to go now, day-to-day and long-term in markets.
The results highlight the “return of market uncertainty, [which] will come as little surprise to anyone given the macroeconomic and geopolitical context that has characterised the year to date,” Abbott said.
“As financial advisers seek to navigate this, they will be keen to identify ways in which they can mitigate against risks and capture market opportunities where they can for their clients.”
The biannual survey has been running 2014 and this year 225 advisers took part, a record for the survey.
