Investors in the UK are returning to established markets as apprehensions about the economy lessen
In a recent statement, Lale Akoner, global market strategist at eToro, highlighted a significant trend among retail investors: trimming their exposure to the so-called Magnificent Seven, a group of tech giants, due to concerns about over-reliance and the vulnerability of portfolios in such a concentrated environment. This shift away from the Magnificent Seven, which includes tech giants like Apple, Alphabet, and Microsoft, has been driven by a maturing mindset among retail investors. Instead of chasing performance, they are now focusing on managing risk more strategically. The initial move away from the US market saw retail investors flocking to emerging markets during the first half of the year. This decision was influenced by the consequences of Trump's tariffs, geopolitical tensions, and weaker currencies in mature economies. However, the drive to diversify portfolios has seen a reversal in the second financial quarter, with increasing interest in emerging European markets, China, and Japan. This shift can be attributed to improving confidence in the resilience of the US economy. Despite this, optimism towards the performance of the Magnificent Seven has decreased significantly. Only 13% of UK investors expect these tech giants to significantly outperform, marking the lowest figure on record. In contrast, only 41% of UK investors expect the Magnificent Seven to outperform at all. The UK domestic market, on the other hand, is viewed favourably by a third of UK retail investors, who believe it offers the strongest long-term opportunities. Thirty-five percent of UK retail investors also believe the US market can offer sustainable returns. Confidence in China's performance has decreased from 31% to 23%, while Europe's performance confidence has dropped from 23% to 20%. Confidence in Japan's performance has also decreased from 17% to 15%. Investors are choosing to overlook concerns of macroeconomic uncertainty to gain a share of well-performing companies with a significant US presence. The US economy's improving performance has attracted investors back, with heightened concerns around political instability prompting retail investors to diversify more aggressively into Europe and emerging markets. Despite the shift away from the Magnificent Seven, Lale Akoner emphasised that the American market remains the cornerstone of global investing. The institution that employs Akoner is eToro, a global investment platform.
