The word of the year for 2023 will be anyone’s guess, but three; boycott, collapse and particularly banking could be in the running. The banking industry has been one of the hottest topics in the financial world this year, and in this feature, we look at some newly conducted research that shows investor confidence in the sector has fallen.
Recently we published a feature on the outlook for the UK property market, and in it, we stated that one reason why prices might fall less than some predict is the lack of options for investors. In particular, we focused on people in the fortunate position of being cash rich, who could opt to put their money into property rather than leave it sitting in the bank.
Globally, there are moves currently underway to reshape the economic landscape; it is this, along with stubborn inflation and rising interest rates, that have been generating shockwaves through the financial system in 2023, which has resulted in an enormous outflow of funds from banking institutions and many to seek out alternative places to keep their cash safe.
The Banking Sector in 2023
The first half of 2023 has been what can best be described as a shocker for banking, with financial institutions collapsing, takeovers and mergers and the rumblings of more problems waiting in the wings. It has caused many people to investigate how the industry operates and how Fiat currencies work, which has resulted in an erosion of confidence in the sector.
Some new research conducted by the FCA-regulated investment platform, Shojin, shows how the banking sector’s problems are impacting investor strategies.
The survey involved more than 900 retail investors with investment portfolios worth more than £10,000. Nigh-on half polled (49%) stated they have less confidence in the banking sector following the highly-publicised collapse of Silicon Valley Bank and the forced takeover of Credit Suisse earlier this year.
In addition to this, 55% of the respondents were worried that these events would further harm the UK’s faltering economy.
The Shojin analysis also revealed that when compared to how they felt one year ago, 44% of investors are now less confident in traditional investment classes, and alternative investment classes will likely play a larger role in their strategies. The findings showed this to be particularly true with younger investors, ages 18-34, with 55% more open to investing in alternative classes.
Jatin Ondhia, CEO of Shojin, said, “The banking collapses of recent months have added doubt and uncertainty to an already testing economic climate, with runaway inflation and rising interest rates posing questions for investors and their portfolios. Our research shows that UK retail investors are wary of how the shockwaves from a banking crisis could impact both their investments and the wider economy.
“Crucially, Shojin’s study highlights some of the actions that retail investors are taking amidst this turbulence in the banking sector. For one, diversification is clearly going to be a key trend – investors are likely to rebalance their portfolios in the coming year. What’s more, the research suggests many will look towards alternative asset classes rather than traditional ones in a bid to diversify their investments.”
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