Just as it seemed that the UK was set on the road out of lockdown, the recent spike in COVID-19 cases has prompted a re-introduction of social distancing measures. Unlike earlier in the year, these new protocols are being implemented while the government is also trying to stimulate economic activity and investment to facilitate a post-pandemic economic recovery.

This is the reality of the “new normal”. Efforts to further contain the spread of COVID-19 must be paired with initiatives designed to avert any severe financial repercussions if the economy is not kickstarted back into gear.

Of course, whatever the policies introduced by Chancellor Rishi Sunak, investors will no doubt be treading carefully. This makes sense given the circumstances. The sheer number of unknown factors (chances of a second national lockdown and a vaccine development timeline) makes market forecasting inherently difficult. However, that is not say that the global market is devoid of opportunities.

If we look at the performance of different asset classes in recent weeks, it is clear investors hold a mixed outlook for the future. Safe haven assets such as gold and other precious metals have posted remarkable performances, driven by the market’s demand for secure assets. At the same time, even amidst the pandemic, commentators are optimistic about stocks and shares – JPMorgan expects the S&P 500 to grow to a record 3,600 by the end of 2020.

In an attempt to measure how these outlooks compare, HYCM recently commissioned research to identify the assets investors are looking to over the coming months. After surveying 900 UK-based investors, the resulting statistics show just how COVID-19 has affected investor’s portfolios; which I have analyzed below.

Retreating to cash

By far, the most popular asset class among investors at present is cash savings. Of those who were surveyed, 78% identified as having some form of their savings in a bank savings account. This was followed by stocks and shares (48%) and property (38%). While not eminently surprising, when viewed in the context of investor’s future investment plans, it’s evident that the majority are adopting a more cautious approach by reducing their risk exposure over the coming months.

Looking to the future, almost a third (32%) intend on putting more money into their savings account – the most popular investment strategy among those who were surveyed. This was followed by the 21% who plan on purchasing more stocks and shares, 17% who intend on investing in property, and another 17% who are pursuing investments in fixed interest securities.

When asked about the more general impact of COVID-19 on their investment portfolios, 43% told HYCM that their assets had decreased in value due to the economic impact of COVID-19. Despite this, a surprisingly high 73% said that they were not planning on making any major investment decisions until the end of 2020.

Missed opportunities?

This mass retreat to cash savings represents a real desire to reduce risk exposure to the maximum extent possible in the medium-to-short term. This is an interesting, albeit somewhat surprising, revelation. As I mentioned earlier, it makes sense for investors to reduce their risk exposure. However, with interest rates hovering just above 0%, putting capital into cash savings could actually result in the value of their savings falling in the long-term. What’s more, we should not forget the other assets currently on offer.

Gold, for instance, has posted some remarkable gains over the course of this year; surpassing $2,000 per ounce on August 4^th for the first time in history. While this rapid growth rate has become somewhat subdued in recent weeks, the spot price of gold is still around 30% higher than it was at the beginning of the year. With uncertainty regarding the US presidential election and the UK’s withdrawal from the EU, it’s possible we could see a second spike in demand for the precious metal, potentially driving the market price up close to $2,500 by the end of 2020.

My point is that even during uncertain times, there are always opportunities available for investors and traders. The difficulty lies in finding the assets that can provide returns and security, along with identifying the right time to invest.

Looking forward

At present, it seems as though investors are hoping that the current forecasts for a V-shaped recovery turn out to be accurate. The issue, of course, is that this exact type of hesitancy and sit-and-wait strategy will only slow the pace of recovery, withholding the investment needed to stimulate the post-pandemic economic resurgence. Thus, we find ourselves in a catch-22 situation.

I believe that most investors will err on the side of caution for the immediate future. What is needed is a catalyzing event that provides investors with the assurances and confidence to pursue new investment opportunities that strike the right balance between risk and return. In my mind, this will be fundamental to the UK’s post-pandemic recovery.