International conflict seen as the biggest threat to investments

By Jon Bragg

April 19 2022
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Despite the perceived risk, most investors have not repositioned their portfolios.

International conflict is now the number one external risk to investments, according to a new eToro survey of investors in Australia and around the world.

57 per cent of the Aussie investors surveyed identified international conflict as the biggest risk, up from 32 per cent in Q4 2021, while the proportion of investors globally who were worried about international conflict has more than doubled from 26 per cent to 57 per cent.

“The tragic events in Ukraine are a triple-hit to investors with its toxic combination of greater market uncertainty, higher inflation from soaring commodity prices, and lower economic growth from sanctions disruption,” said eToro global markets strategist Ben Laidler.

“History shows geopolitics often does not have a long-lasting impact on global markets. Fundamentals remain solid, with company profits rising, economies reopening after the pandemic, company stock market valuations now cheaper, and markets now fully expecting central banks to raise interest rates significantly.”

Globally, respondents ranked rising inflation as the next biggest risk (47 per cent) followed by the state of the global economy (37 per cent).

While facing a number of major challenges, 73 per cent of investors globally and 64 per cent of those in Australia remained confident in their portfolios and only 41 per cent of all respondents said they had repositioned their portfolios.

eToro also found that 64 per cent of Aussies currently invest in domestic equities and 23 per cent invest in foreign equities, while 24 per cent said they invest in crypto.

Energy stocks are expected to provide the best investment buying opportunities over the next three months according to 31 per cent of respondents locally, just ahead of tech stocks (30 per cent) and health stocks (30 per cent).

Aussie investors highlighted clean technology as their top long-term investment theme (38 per cent), ahead of digital transformation (29 per cent), the ageing population (29 per cent), the growth of the global middle class (23 per cent) and robotics and automation (22 per cent).

Additionally, 56 per cent of local investors said they expect to invest the same amount over the next year.

“Australian retail investors recognise the significance of diversification with volatility increasing this year, but they are not allowing emotions to rule their investment decisions by panic selling,” said eToro Australian market analyst Josh Gilbert.

“Emotion is a big part of investing, and it can be easy to get caught up in news and media headlines when markets enter correction territory. However, it is evident in the data that Australian retail investors are doing their research, maintaining a cool head, and are confident in their investment choices.”

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