UK investors, gearing for further shockwaves after Britain’s Brexit vote, slashed equity holdings in July to the lowest in at least five years, while almost halving property allocations in their portfolios.
The Reuters monthly survey of UK-based funds, conducted from July 15 to 27, is the first to fully reflect allocation shifts after the June 23 referendum on Britain’s EU membership that resulted in a win for the Leave camp.
Ripples from the vote are already reverberating through the economy, with big hits to consumer demand and property prices seen tipping the UK into recession.
While the UK-focused FTSE 250 index has recovered its losses over the past month on expectations of more stimulus from the Bank of England, investors are clearly bracing for pain in coming months.
“Financial markets... have continued to be very generous to global investors over the recent month, even though the economic backdrop, and fall out, from Brexit has been very well documented as bad news for the global economy,” said Peter Lowman, chief investment officer at Investment Quorum.
“However, alongside these uncertainties came the normal response from the leading central banks as they spoke about the possibility of additional loose monetary polices, to assist the global economy, and the prospects for other actions such as helicopter money.”
The latter referred to central banks delivering money more or less directly to consumers. Rattled by the prospect of more turmoil, UK asset managers ramped up safe haven bond allocations, which jumped by 5 points to 30.7% — the highest level in at least five years.
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