Do DIY Investors have an inflationary crystal ball?

In July, almost half of UK investors thought that inflation would be above 2% in six months time – it looks like they might be right

In July, UK investors were not convinced that inflation would continue its downward trajectory, or even stay at 2%, according to research from digital investment platform Charles Stanley Direct. 48% of DIY investors believed that inflation would rise again over the next six months.

As the headline inflation rate sees its first increase this year, it looks like they may be right.

44% of investors predicted that in six months time inflation will either be 2% or lower – and if decisions have been made on this basis, this cohort may be disappointed.

When it comes to the impact on rates, investors overwhelmingly believe that interest rates will be below their current levels in six months time – 79% believe rates will be below 5%. 13% think that interest rates will be back to their pre-2022 levels of between 0% and 1% in time for Christmas.
 
Rob Morgan, Chief Investment Analyst at Charles Stanley Direct, comments: “It has indeed been a Cruel Summer for the Bank, as service price inflation refuses to budge from its 5% perch. Driven by air fares, package holidays, and hotel prices, so-called ‘Swiftonomics’ has contributed to the first headline increase to inflation this year, buoyed by a strong jobs market and steady wage growth. This casts a shadow of doubt over further rate cuts in the coming months.

“Britain’s cohort of DIY investors were divided last month on the direction of travel for UK inflation, but most saw this increase coming. Many will have made decisions accordingly, both within their investment portfolio and their household budgets. This could include increasing their exposure to equities to ensure their investments outpace cash returns, ensuring they’re on the best mortgage rates, and hunting down the best cash savings rates. As ever though, it’s time in the market, not timing the market – a diversified long-term portfolio will best protect against economic ups and downs.”
 
Methodology
 
Research was carried out for Charles Stanley by Censuswide. It surveyed 1,007 DIY Investors in the UK (’Self-Directed’), defined as; investors who actively choose their own investments, making their own asset allocation decisions, aged 18+. Survey conducted between 05.07.2024 and 10.07.2024.