Investors braced for lower returns amid geopolitical turmoil - Scottish Friendly
“The most important thing for investors is to remain invested, and to avoid reacting to short-term market noise” – Kevin Brown, savings expert
Investors are braced for more modest profits over the next five years, with three-quarters of them expecting total returns of less than 50 per cent.
That’s one of the key findings in Scottish Friendly’s latest family finance tracker, which follows a strong run for markets in recent years.
As of April 13, the UK’s 100 largest companies had returned 50.5 per cent and the US’s 500 biggest companies 62.9 per cent in total over the previous five years.
The latest tracker shows that expectations are varied.
One in four investors expects to generate total returns of 50 per cent or more over the next five years, with 24 per cent expecting returns of between 20 per cent and 49 per cent. A further 16 per cent expect gains of 15-19 per cent, 13 per cent of investors expect 10-14 per cent, while 16 per cent forecast returns of less than 10 per cent in total over the next five years.
The findings come amid growing concerns about the impact of elevated market valuations and heightened geopolitical tensions on future returns.
Kevin Brown, a savings expert at Scottish Friendly, said: “While markets have delivered strong returns over the past five years, our research reveals that investors are clearly expecting more modest gains over the coming five.
“This perhaps reflects a growing perception that the environment ahead may be more challenging, with elevated valuations – particularly in the US – and ongoing geopolitical uncertainty influencing investor sentiment.
“But, if the past few years have shown us anything, it’s that markets can defy expectations even when sentiment is cautious, valuations are high or conditions appear challenging.
“Against that backdrop, investing should be viewed through a long-term lens,” he stressed. “Whether returns are more subdued or not over the coming years, the most important thing for investors is to remain invested, and to avoid reacting to short-term market noise.
“Over time, it is this discipline that can help investors build long-term wealth, with markets historically helping investors grow money ahead of inflation when held over the long term.”
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