Economic uncertainty, market volatility, and political risk impacting investor confidence
Nearly one in three UK investors (31%) lack confidence in achieving positive returns in 2025, according to new research conducted for digital wealth manager Nutmeg, owned by JP Morgan.
The study, carried out by Opinium in January, highlights that even experienced investors are feeling the strain, with 38% of those who have been investing for over a decade admitting they are uncertain about this year’s investment prospects.
As concerns mount over economic instability, fluctuating markets, and geopolitical events, more than half of the surveyed investors (52%) cited economic uncertainty as the most significant risk to their investments this year. This was followed by market volatility (41%) and political risk (28%), reflecting the broader anxieties about global financial conditions.
Global factors weighing on investor sentiment
The report comes against the backdrop of growing international economic tensions, including concerns about the British steel industry following former US President Donald Trump’s decision to impose a 25% tariff on steel imports.
UK Business Secretary Jonathan Reynolds described the move as “disappointing”, while the European Union responded with countermeasures on US goods. These developments add to existing market turbulence, leaving investors wary about the global financial outlook.
James McManus, chief investment officer at Nutmeg, acknowledged the complexity of the current investment climate, stating:
“For UK investors this ISA season, there’s plenty of factors weighing on their mind: a new administration in the US, changing geopolitical risk and economic uncertainty at home.
“The truth is, to greater and lesser extents, all of these will impact how markets perform this year, the level of volatility we see, and the returns investments will deliver.”
He emphasised the importance of portfolio diversification, advising investors to take a global approach to mitigate risks.
“While past performance is never a guarantee of future performance, history shows us that by taking a global approach and diversifying your portfolio, investors may mitigate market-specific shocks or volatility and still benefit from growth where it’s available,” McManus added.
Investors bracing for a volatile 2025
Market fluctuations have already had a tangible impact, with many investors adjusting their strategies to navigate the uncertainty.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, described the changing sentiment in financial markets, noting how optimism from earlier economic rebounds has faded:
“As the ‘Trump bump’ has turned into a slump, investors are bracing for fresh volatility ahead. The impact of tariffs is front of mind.”
This cautious sentiment aligns with the wider economic landscape, as higher inflation, fluctuating interest rates, and unpredictable geopolitical shifts continue to shape market movements.
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What this means for investors in 2025
With many investors expressing concern about potential losses, financial experts are urging caution but not panic.
Investment professionals continue to stress the importance of:
- Diversification – Spreading investments across multiple sectors, industries, and regions to reduce risk.
- Long-term strategy – Avoiding reactionary decisions based on short-term market fluctuations.
- Keeping an eye on policy changes – Understanding the impact of government decisions, trade tariffs, and global economic policies on market performance.
As economic uncertainty remains a key challenge, investors will need to stay informed and adaptable to ensure they can navigate what is expected to be another turbulent year for the markets.
