With US tapering expected to end in a month or so, it is perhaps unsurprising that equities remain the most popular asset class among retail investors.
Uncertainty regarding what effect, if any, the end of quantitative easing in the US might have on bond markets and interest rates is demonstrated by the latest IMA figures, which show net retail inflows into equity products reached £1.05bn in July. This significantly overshadows the £79m that flowed into fixed income vehicles, with mixed asset investments proving the second most popular investment choice, with estimated net retail sales of £390m.
In July the bestselling region for equity investments was the UK at £678m, suggesting investors are perhaps looking to the perceived security of the domestic market. The least popular regions were Europe, with net retail outflows of £48m, and North America, with outflows of £30m.
Since these figures were recorded, however, tension between Russia and Ukraine has risen sharply and concerns about the situation in the Middle East, particularly Iraq and Syria, have resulted in an increased security level in the UK.
That said, markets remain optimistic, with the S&P 500 index continuing to sit near its record level of 2,000, having gained 9.14 per cent for the year to date to August 29 2014.
Even the FTSE EuroFirst 300 has performed relatively well with a return of 2.34 per cent, according to FE Analytics, in spite of growing concerns about economic growth in the region, with Germany having recorded a contraction in its economy and French growth remaining flat.
Japan seems to have come down from the highs of last year, with confidence in prime minister Shinzo Abe and his reform plans seemingly in decline. The Nikkei 225 index has recorded a loss of 4.74 per cent for the year to date.
This is underlined by the fact that while Asia was the second most popular region for equities in July, with net retail sales of £203m, in terms of the most popular IMA sectors, investors have been choosing Asia Pacific excluding Japan funds to invest their money. It was ranked as the fifth most popular sector, with net retail inflows of £198m, whereas the IMA Japan sector recorded inflows of just £79.7m.
For the time being at least, emerging markets seem to have slipped from the radar of investors, although the MSCI Emerging Markets index appears to have recovered its earlier losses, with a year-to-date performance of 10.33 per cent, beating the S&P 500 into second place.
It could be that emerging markets will take advantage of being out of the spotlight for once. But given the geopolitical turmoil, the chances of markets running smoothly for the rest of the year are looking increasingly unlikely.
Nyree Stewart is features editor at Investment Adviser
