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Rising interest rates and supply chain concerns: how are investors managing their assets?

Giles Coghlan, Chief Analyst at HYCM
Giles Coghlan, Chief Analyst, HYCM

By Giles Coghlan, Chief Currency Analyst at HYCM

Last week was time for the Bank of England’s (BoE) hawks to take flight, as the central bank announced another interest rate increase up to 0.75%. This was a historic move that marked the first back-to-back rate hike since 2004, and one which was driven by spiralling inflation, which is predicted to reach 7% in April. In short, this means one thing for traders and investors: many are fearful about the prospect of enduring yet months of turbulent economic conditions.

With this in mind, HYCM commissioned a new body of research to uncover exactly what investors are thinking about recent market conditions, as well as their efforts to manage their finances in light of these circumstances. The findings revealed that less than half (43%) were confident about their ability to emerge from the pandemic in a stronger financial position, marking a 10% decrease when HYCM asked the same question last year.

Clearly, investor confidence is waning. At the moment, many cite the BoE’s policy-setting as a key component to their own decision-making; to be specific, 36% said that their strategy was impacted by the BoE’s interest rate hike back in December, as well as the expectation of further hikes throughout 2022. But what other factors are contributing to this investor outlook?

Supply chain concerns and omicron woes: just a fleeting concern? 

As the headlines might have suggested throughout 2021, two factors dominated the global investment outlook: the onset of Omicron and spiralling supply chain problems. That said, HYCM’s research uncovered that these factors are not necessarily at the top of investors’ agendas.

On the contrary, just 28% of investors said that the risks associated with Omicron caused them to re-evaluate their strategy. This is not necessarily the most surprising news, now that we appear to be over the peak of infections and science has prevailed that Omicron results in milder symptoms and fewer hospitalisations. The relaxation of government guidelines in the UK, as well as the BoE’s quantitative tightening have likely provided traders, advisers and investors with some added assurance, too.

What is more surprising, perhaps, is the fact that investors currently place ongoing supply chain issues rather low on their list of concerns when drawing up their investment strategies. According to the research, even fewer (26%) said that supply chain bottlenecks had prompted them to make any changes to the way they manage their investment portfolio – very surprising news indeed, given that experts currently expect these issues to continue far into 2022.

Currently, even big tech players like Apple and Tesla foresee bottlenecks causing continued chaos at ports, warehouses and retailers. In particular, Tesla are taking measures to mitigate these factors by increasing vehicle prices and substituting alternative chips for those that are in short supply to cope with demand, for example.

That said, overall, those with larger investment portfolios appear to be taking supply chain issues more seriously – two in five (41%) of those with portfolios in excess of £500,000 said that supply chain issues had prompted them to take action. As such traders, advisers and investors would all do well to keep monitoring any constraints going forward.

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