UK investors have changed their tune on the British stock market, with the number holding UK equities having jumped by 10 per cent over the last three months.
In Etoro’s Retail Investor Beat, which surveyed 1,000 UK investors, 80 per cent said they now have cash in UK equities, the highest level in over a year.
This optimism for UK equities was largely driven by younger investors, with 39 per cent of 18 to 34-year-olds backing their home market to outperform over the next five years.
In contrast, only nine per cent of those aged over 55 opted for the UK, instead predicting that the US (24 per cent) and emerging markets (21 per cent) would see the strongest gains.
The push into UK equities seemed to be driven by a shifting macro environment. A total of 44 per cent said they would be shifting their portfolio in anticipation of expected rate cuts later this year, largely by reducing their cash allocation and putting more money into equities.
Amongst those that have rebalanced their portfolio, one in three said they’d be allocating more to dividend-yielding stocks, a key potential driver for the surge into UK equities, given the FTSE 100’s strong dividend yield.
Ben Laidler, global markets strategist at Etoro said: “The UK stock market has been out in the cold for several years but our latest survey suggests that sentiment around the FTSE could finally be gathering steam.
“We’re already seeing the makings of a global market rotation and UK retail investors are clearly keen to get ahead of the game by adapting their investing approach. The UK market, with its stellar dividend performance, appears to benefitting from this trend.”
Meanwhile, investors also seemed to slowly be moving away from their strong push into the Magnificent Seven. 21 per cent of investors said they have been scaling back on investments in tech stocks.
This is the same number planning to invest more in the seven stocks, while 37 per cent said they would maintain their current allocation.
“It’s also important to remember that reinvested dividends have historically accounted for the majority of total returns in non-US markets, and payouts are forecast to rise by 5 per cent this year,” added Laidler.