Investors predict worse Covid fallout in 2021

A new study commissioned by trading broker HYCM has revealed how anxieties surrounding the coronavirus pandemic and Brexit has affected UK investors’ plans for 2021, with the majority believing the true impact on the UK economy will not be seen until next year.

The survey was conducted across 885 UK-based investors, all of whom have investments “in excess of £10,000”, excluding their property and workplace pensions.

The research found that 65% of UK investors believe the effects of COVID-19 on the UK economy will be worse in 2021 than they have been this year, despite long-held hopes of a sustained FTSE recovery. With the Covid-19 vaccination programme beginning last week, the UK index ticked up amid a fleeting breath of optimism, only to tumble towards the weekend as ongoing Brexit negotiations failed to produce a concrete deal.

Even with the relatively smooth progress of the Pfizer vaccine rollout so far, it is expected to be some time before the bulk of the population are able to be inoculated, as older and vulnerable groups are currently front of the queue. 62% of UK investors said that they will wait until a vaccine is widely available before making any “major financial decisions”, after which 43% said they plan to invest into the sectors “worst-affected” by the pandemic, such as travel and hospitality.

Potentially putting hopes of normality at risk, however, is the news that the UK has identified a new strain of Covid-19. While authorities have cautioned that there is not yet any evidence to suggest this strain is any more severe or will have any impact on the efficacy of current vaccines, the nerves are present.

Meanwhile, 58% of investors want to see the Brexit deadline pushed back from 31st December to allow for more negotiating time, even though the UK is set to leave the EU – regardless of whether a deal is reached or not – at midnight on New Year’s Eve. UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen agreed to continue talks over the weekend despite an initial deadline on Sunday, but time is swiftly running out, and a UK source reported that there has still “not been significant progress in recent days”.

Three in five (60%) investors plan to adopt a “conservative investment strategy” by focusing on security rather than returns in the coming 12 months, while a third (34%) said that they will be looking to invest in renewable energy stocks and shares in 2021. This figure rises to 46% among those aged between 18-34. 

Giles Coghlan, Chief Currency Analyst at HYCM, commented on the report’s findings:

“With 2021 fast approaching, it is clear investors are preparing for another year of market volatility as a result of COVID-19. What’s more, investors are quite reasonably fearing that the worst is yet to come with regards to the pandemic’s economic damage.

“The arrival of one or more vaccines will be an interesting development. Once this happens, I’d anticipate a flurry of activity on the financial markets as investors hope to take advantage of sectors posed for recovery.”   

The growing interest in green investment is set to be a focal point in investment portfolios across the next year. Stavros Lambouris, CEO at HYCM International, explained: 

“The research is an important reminder of the pandemic’s impact on investors. Aware of the uncertainty that lies on the horizon, the majority of investors are evidently taking a cautious approach to managing their investment strategies.
 
“That said, a significant proportion are looking to invest in green energy stocks and shares, which has no doubt been influenced by both Prime Minister Boris Johnson and US President-elect Joe Biden both tabling ambitious green strategies recently. This will be a key trend to watch in 2021″.