Voice of the Investor – Q1 2025
Investor outlook in Q1 ’25
It’s been a turbulent start to 2025. Although investors are mostly positive about their own personal situation, nearly half (47%) of investors expect investments to be more volatile in the next 12 months. And a fifth (20%) of investors are concerned that market volatility will have an impact on the value of their investments
- The main response to volatility in investments markets is moving money into cash savings (26%) and taking financial advice (25%)
- The young are much more likely to make changes in response to market volatility, while older investors are more likely to stay the course
Investor Opportunities in Q1 ’25
In Q4 ’24 we noted that following a year of good stock market performance, the US had overtaken the UK home market for the first time, as the best buying opportunity for the next 12 months. The first three months of the year have been a tumultuous period for US investors, with uncertainty about US trade policy, concerns about inflation and Donald Trump rolling out and threatening various trade tariffs[1]. The US stocks markets have responded negatively and this quarter we have seen a considerable reversal, with the UK again topping the list of best buying markets, with its biggest recorded lead over the US (+10pp).
[1] Dow plunges more than 1,000 points, Nasdaq craters as recession fears batter stocks – CBS News
((Above) we noted that half (47%) of UK investors expect volatility in the investment markets this year, and 20% are concerned volatility may impact the value of their investments. We also saw that the most common response to market volatility is moving money into the protected shelter of cash savings, where money can also be easily accessed. We have seen a significant increase in investors saying that cash assets represent the best buying opportunity for the year ahead, making cash savings the 2nd best buying opportunity in Q1 ’25. This increase is driven largely by younger investors aged, 18-34 (32%).
The survey also finds that a third (32%) of investors are concerned that inflation may impact the value of their investments. In February (just before our March fieldwork) the Bank of England set out its forecast for inflation, anticipating inflation to rise in the UK to 3.7% by Q3[1]. One of the most common investor responses to inflation is to move money into commodities because prices typically rise with inflation, and therefore are often seen as a hedge bet against the impact of inflation. This is reflected in our survey results where we have seen a +3pp increase in those recognising commodities to be the best buying opportunity in Q1 ’25. Furthermore, when we check the best buying opportunities by sector, although the usual sectors still lead (technology, healthcare, financial services) sectors that fit within commodities have shown the largest improvements in Q1 (Energy +7pp, Utilities +5pp, Materials +4pp).
[1] Monetary Policy Report – February 2025 | Bank of England
Analysis on trending products:
Crypto
Since the survey began in Q1 ’24 we have seen a continuous increase each quarter in Crypto as a best buying opportunity, up from 10% to 17% in one year. This puts crypto among the top 4 asset classes as it becomes more mainstream and widely accepted. Trump strongly endorsed Crypto during his election campaign and has signed an executive order creating what he calls “a Strategic Bitcoin Reserve” as well as a “Digital Asset Stockpile.[1]” The Crypto market was opened up in 2024 when Spot bitcoin ETFs were launched in January 2024, making bitcoin more accessible to a wider range of investors and paving the way for more such products[2]. All of this has contributed to Bitcoin reaching record prices in 2024,[3] further fuelling future confidence and demand.
As we might expect with any new technology, young investors are notably more supportive and interested in Crypto. Young investors (34%) are twice as likely as investors overall (17%) to see Crypto as the best buying opportunity, and Crypto is rated the best buying opportunity among this group.
A quarter (26%) of investors are likely to consider buying crypto in the next 12 months, and this rises to over half (54%) of young investors (18-34). The key reasons given by those who expect to invest in Crypto is that they think it’s the future (41%), they are interested in it (40%) and for the potential returns (40%). However, even among this group that say they are likely to buy it, few say they think it is for people like me (15%).
[1] Bitcoin reserve: Why has Trump set up a US crypto stockpile? – BBC News
[2] How Spot Bitcoin ETFs Changed Crypto Investing In the Year Since Launch
ISAS
Reducing the cap on ISAs would convince a minority (19%) to move money from cash ISAs into investments. Most say they wouldn’t make changes (45%). Asked what would encourage non investors and current investors to put money into Stocks & Shares ISAs, the most common answer given was increasing the annual allowance beyond £20k, if the product was simplified, and more education.
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