Interactive Investor: 80% planning to increase equity exposure for 2024

Investors increasingly bullish towards UK market

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Investors are proving optimistic as they head into 2024, with 80% planning to increase their equity exposure and over half upping their exposure in the UK, data from Interactive Investor shows.

While 2024 comes with some worries of recession, a survey of visitors to the Interactive Investor website between 5-6 December, totalling 1,500 responses, show confidence in the equities market. On the flip side, few are planning on placing more money in cash and bonds, with only 8% saying they will increase exposure in each of those sectors.

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Alice Guy, head of pensions and savings at Interactive Investor, said: “Investors’ optimism that interest rates will fall in 2024 is directly linked to their plans to up their equity exposure during next year.

“Potentially falling interest rates means cash returns could fall significantly, making it harder to beat inflation with bank savings. Despite economic uncertainty, investors know that equities are usually a better bet than cash for long-term growth, historically winning out over longer periods.”

Near a quarter of investors believe the FTSE 100 will end 2024 over 8,000, while last year, just 9% believed it would reach that level by end of 2023. Another 48% of investors believe the FTSE 100 will be within the 7,501-8,000 mark. On Thursday 14 December, the FTSE 100 closed at 7,648.98.

The faith has led 57% of respondents to say they will increase exposure in UK markets next year, an increase of 7 percentage points from the year prior. The US is next on the list, but with a drop of just 31% planning to increase exposure.

Lee Wild, head of equity strategy at Interactive Investor, said: “After significantly underperforming other global stock markets in the post-Brexit period, plenty of investors believe UK Plc is undervalued and primed for a rebound.

The number of overseas buyers sniffing around British companies confirms that. It’s why over half of respondents (57%) to the II poll said they would be increasing exposure to UK shares in 2024.”

Most investors also united under the belief that interest rates will fall throughout 2024, with 59% claiming the rate will reach or go below 4.5%, and only 9% of investors believing the interest rate will rise.

“Interest rates remaining higher for longer has been the accepted outlook for global interest rates, yet opinion has become more dovish, implying central banks may decide to bring borrowing costs down sooner than expected,” Wild said.

“Much will depend on the strength of economies and a further decline in annual inflation, but respondents to the II poll are very much of the view that UK rates will be nowhere near current levels in 12 months’ time.”

The survey also reflected ongoing trust in the tech sector, with 36% of investors saying it will be the strongest performer in 2024. This was followed by defence at 28%, mining at 21% and banks at 20%. Fewer investors were confident in the travel, retail, and tobacco sectors, which garnered 8%, 7%, and 2% respectively.

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