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23rd July 2021
Four in five investors yet to make tangible changes to portfolio due to inflation, research shows
A financial trading platform has surveyed international investors to reveal their attitudes towards inflation. The survey revealed that while most investors(60%) are noticing inflation in their day-to-day lives, only one in five(20%) have made tangible changes to their portfolio in response to it. The platform also revealed the sectors that have historically performed well during periods of increased inflation, and how traders have been behaving in these areas.
Commission-free trading platform, Stake, surveyed investors to reveal attitudes towards inflation in 2021 and how that correlates with trade behaviour.
With the US Consumer Price Index(CPI) rising by 0.8% in April, the greatest month-on-month increase since the 1980s and the index up 4.9% in the 12 months to May 2021, Stake polled traders across three markets(UK, AU & NZ) to understand what impact the increased focus on inflation was having on trader attitudes and trade behaviour.
The key highlights from the survey are:
-Three in five investors(60%) say they are noticing inflation in their day-to-day lives
-The majority of investors(55%) don’t believe that rapid inflation is a threat to their current portfolio
-Four in five investors(80%) have not yet made tangible changes to their portfolio due to inflation
-However, if inflation continues to increase, more than half (53%) of investors would consider a different investing approach.
Stake has outlined some market sectors that have historically performed well during high inflation periods:
Over the last six months, no other sector has outperformed the S&P 500 Energy Index. Since the start of the year the sector has undergone a 44% gain. Research out of asset managers Schroders found that the energy sector has outperformed inflation over a 12 month period 71% of the time since 1973.
Property values tend to increase during expansionary periods as leases and rents follow inflation. Property can be accessed through the stock market via Real Estate Investment Trusts. Stake suggests researching Equity REITs specifically for this, rather than mortgage REITs-inflation tends to lead to interest rate increases which increase the risk of holding debt.
-Mining and materials
As with energy, a reliance on raw materials means their price is tightly correlated with inflation. The sector is currently up 14% since the start of the year. Gold and other precious metals have traditionally been a portfolio-saver during inflation periods, however research indicates just a 16% correlation between gold and inflation.
Stake has seen the value of buy trades in this sector increase by 11% in H1 of 2021, compared to H2 2020. Conversely, the value of buy trades in the tech sector has decreased by 37% during the same period.
Andrew Dengate of Stake said,
“Our research shows that while inflation is a factor investors are paying close attention to, we are seeing a considered and fairly strategic response with a number of investors looking for ways to leverage the opportunity that inflation could present.
“For example, the tech sector enjoyed a massive year in 2020, frequently dominating Stake’s most traded stocks, however as we’ve seen from the data, the value of buy trades has decreased in H1 2021 with some of the volume appearing to shift into sectors such as mining and materials, that have historically performed well during periods of higher inflation.”
Stake is producing a three part content series covering inflation and how it can impact the markets. All three will be published here with Part One now live.
Stake is a financial trading app that gives UK investors access to more than 4,500 US stocks and ETFs. It doesn’t charge any fees on trades nor any brokerage or custody fees. Instead, the pricing structure is simple, it charges a 0.5% FX fee on deposits and withdrawals only.