What’s on your playlist this year?
Over the years, several studies have proven that investors can enter emotional relationships with the stocks in which they invest. Research has reinforced the concept that equity prices are not only driven by analysis of a company’s prospects but also by external factors which can directly impact investor mood. For example, correlation has been found between improved stock market performance on sunny days or poor performance after a country loses a crucial football match.
One recent study introduces a novel measure of investor sentiment, which it suggests captures actual sentiment rather than shocks to sentiment1. A significant correlation has been determined across 40 national stock markets between weekly equity returns and the emotional content of that week’s top 200 songs on Spotify. The findings suggest that stock markets perform better when a country is listening to happier songs!
‘In our main findings, we document a positive and significant relation between music sentiment and contemporaneous market returns, controlling for world market returns, seasonality’s (sic) and macroeconomic variables. Music sentiment also predicts increases in net mutual fund flows and absolute sentiment precedes a rise in stock market volatility. Our study provides evidence that the actual sentiment of a country’s citizens significantly affects asset prices.’
Whatever’s on your playlist in 2022, you can rely on us to take the emotion out of your investment decisions.
Global attitude to risk variance
Affluent to ultra-high-net-worth UK investors are more conservative than their international counterparts, according to new research2. Over half (54%) of UK respondents rated themselves as conservative in their approach to risk, with the lowest percentage of any nation surveyed (10%) saying they take an aggressive approach. In stark contrast, almost half of Chinese respondents rated themselves aggressive in their approach to risk, with just 19% conservative. Possibly reinforcing the lower risk, long-term mindset, the main reason for two-thirds (66%) of UK respondents for investing and saving is for their retirement, with 35% citing future healthcare costs and entrepreneurial activities (17%).
Leave the relief
Recent data analysis3 has highlighted that over 1.5 million of the UK’s highest earners failed to claim an estimated £810m in tax relief in the 2018/19 tax year, totalling around £2.5bn between 2016/17 and 2018/19. Higher rate taxpayers benefit from 40% tax relief, yet eight in ten didn’t use their Self-Assessment tax return to claim it; similarly, over half (53%) of additional rate taxpayers failed to claim the 45% tax relief for which they are eligible.
1The London Business School, 2021
3Pension Bee, 2021
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.