Investor confidence drops to lowest level since April

Boring Money’s Investor Confidence Index* fell five points to 42 in October, its lowest level since April. Confidence has now fallen 10 points since July, when the Index reached 52, with no sign of a recovery following August’s sharp decline.

 
Sentiment towards the UK economy saw the biggest fall in October, dropping from -28 to -40.

The decline was particularly pronounced among higher-income investors. Confidence among those with household incomes of £80,000 or more fell six points from 53 in September to 47 in October. This is down from 64 in July, narrowing the gap between highest- and lowest-income investors to just six points.

The October findings, collected over the entire month, indicate that investors were becoming more concerned about the economy and financial markets, even before the Budget was announced.
 

Investors remain active despite falling confidence

Despite falling confidence, investors continued to make changes to their portfolios in October.

In October, 23% of fund investors made changes to their investments, with 44% of those who made changes increasing the amount they had invested.

There was also a slight reduction in defensive behaviour. Among investors making changes, 19% moved more money into cash, down from 25% in September, while 22% increased their exposure to defensive assets such as bonds and income funds, compared with 29% the previous month.
 

Budget adds to concerns about personal finances

 
An immediate post-Budget snap poll of Boring Money readers** shows that the Chancellor’s decisions dented confidence in their personal finances.

While 49% of readers feel positive about their own finances, just 8% say the Budget has had a positive impact on how they feel about their finances over the next 12 months.

Three in ten readers (30%) say they intend to cut back on spending as a result of the Budget.<  

Savings tax rise sparks strongest opposition

 
The proposed increase in tax on savings income emerged as the most unpopular Budget measure, with 82% saying they disagreed with it.

Meanwhile, 39% say they plan to pay more into ISAs or other investments as a result of the announcements, making this the most commonly cited planned action.

Holly Mackay, CEO of Boring Money, comments: Investor confidence fell in October as did expectations about the outlook for the S&P 500. It’s notable how confidence has fallen amongst higher earners. Given the combined triggers of rising inflation, a poor month for tech stocks and the threat of the UK Budget, I’m not surprised that higher earners are feeling less confident about the outlook.

As we moved into November and digested the Budget, the unexpected hike in tax on savings is, by some distance,  the least popular measure among Boring Money readers, and this will obviously impact higher rate taxpayers more. If we see continued volatility in markets I wouldn’t be surprised to see investor confidence remain low in November, as all households feel the pressure from multiple sources.”