Commodities and crypto out of favour as investors seek stability

Investors are seeking stability in the face of looming recession, with 69% ranking risk as the most important factor when making investment choices – by Richard Cobb

• Cryptocurrency deemed too risky by investors seeking stability in the face of looming recession
• Over two thirds of investors state risk is now the most important factor when making investment choices
• Millennials are increasingly more risk conscious in their investment choices

Research published today reveals that investors are looking for safe places to put their money in the face of looming recession. A survey by UK law firm Michelmores of 1,500 millennials, Gen X and baby boomers with over £25,000 in investable assets reveals that the cost of living crisis has changed investors’ attitude to risk and impacted the way people are choosing to invest their money.

Michelmores’ research, conducted in the two weeks following the FTX collapse, found that attitudes to the cryptocurrency gold rush are changing, with many investors becoming disillusioned with it as an asset class. The research indicates that investors are highly unlikely to buy into ‘riskier’ assets such as cryptocurrency in the coming year. However, a core contingent still views it as having potential, with 25% of millennials investing more than they did two years ago.

Just over half (51%) of respondents said that increased cost of living had decreased their appetite for risk to some degree in their investment choices. However, despite the greater avoidance of risk, only 17% describe their current financial position as ‘pessimistic’, while 40% say they feel ‘comfortable’.

Despite the increased awareness of risk, over half (58%) of those surveyed state that they are still fairly or very likely to invest in financial products or schemes within the next year, viewing property as a low-risk option which would offer ‘the best return’ on investment amid wider market instability.

Each of the surveyed generations have a higher interest in traditional forms of investment, such as cash and property, than two years ago.

Almost a quarter of investors view cash (22%) and property (24%) as the best protected investments, while equity funds (16%) and bonds (16%) are less popular. There is a very low appetite for investment in cryptocurrency (9%) and commodities (9%).

An increasing number (55%) of millennials say that risk is important to them when investing money, compared to just 44% in 2019. Awareness of risk is high for all generations, with over two thirds (69%) of all respondents noting this as the most important factor when making investment choices.

The data reveals that millennials have grown in confidence in making financial decisions, with decidedly less concern about whether family and friends have invested money in a similar venture before deciding to commit, compared to results from Michelmores’ previous survey in 2019.

Richard Cobb, Senior Partner at Michelmores, says:

“The instability caused by Brexit, the pandemic, and the war in Ukraine – on top of a global forecast recession – has led to millennials being more risk averse in their investments.

“Cryptocurrency is a volatile asset class and – understandably in the wake of the FTX collapse – is currently suffering from a weakened level of confidence. With ongoing conversations around Britcoin and calls for increased regulation, this could boost investor confidence and cement cryptocurrency as more than just a passing trend.

“While our data suggests that awareness of risk is heightened in each generation, those with a longer-term outlook may seize the opportunity to buy up a variety of assets while the value is low and potentially reap the rewards.”

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About the survey

Michelmores, in collaboration with research company 3Gem, conducted a UK survey of 1,500 affluent Millennials, Gen X and Baby Boomers, defined as individuals who have investable assets of £25,000 or more. Data was collected in November 2022.