Investors are hurriedly pulling their money out of the stock market as the supercharged returns driven by years of low savings rates and minimal inflation come to a halt.
Enthusiasm for investing soared during lockdowns as hundreds of thousands of new investors used their unexpected savings, and abundant free time, to dabble in share trading.
But DIY investors have started to take their money out of the stock market in large numbers. Savers withdrew a record £1.9bn from funds that invest in stocks last month, the fastest withdrawal rate since July 2016, when the Brexit vote spooked investors and led to a sharp fall in the FTSE 100.
Overall, savers have taken more than £4bn out of the market this year, according to Calastone, a research group.
Sceptics had long warned that fortunes built largely on returns from technology and “growth” stocks – turbocharged by ultra-low interest rates – could not last. Yet the market defied expectations again in 2021 as the reopening of the global economy breathed life back into shares.
But the tide has finally turned this year. A combination of rampant inflation, rising interest rates and the outbreak of war in Europe has shaken investors across the world.
The S&P 500, America’s benchmark index, has lost 18pc of its value. London’s FTSE 100 has fared much better, buoyed by its large number of oil and gas stocks, but has still dropped by 2pc so far this year.
Many DIY investors are now having to confront the sinking value of their Isas and pensions. Their anxiety has rippled across the industry: the number of new customers at Britain’s largest investment broker, Hargreaves Lansdown, is falling.
Julian Roberts of the investment bank Jefferies said Hargreaves, a bellwether for the sector, had attracted fewer than two new joiners for each leaver in 2022 for first time since 2010.