Gloomy ISA season as volatile stock markets keep private investors away

The dramatic volatility in February and March saw the FTSE 350 drop over 5% from peak to trough, before recovering to end the period 2% higher than the end of January. This masked a sharp difference in the performance of larger and smaller companies. Over the two months, the FTSE 100 rose 1.7% while the FTSE 250 rose 5.3%.

Private investors benefited to the tune of £7bn as the market rose. They sold £2bn of their shareholdings in the period, taking their investments to £211.2bn at the end of March.

John Roundhill, Director of Capita Registrars commented: “Government figures show the UK savings ratio is well below the long run average. UK homeowners have become used to using the rising value of their homes to fund their spending, almost as a personal ATM. Shareholders seem to be using their equity holdings to prop up their household finances in a similar way.

Commenting on the likely strength of the crucial ISA sales season, John Roundhill added: “It seems quite clear that private investors will not have rushed to top up their equity ISAs. It was not until the second half of March that the market staged a sustained recovery – that will have come too late to reassure already nervous investors that it was time to buy before the financial year closed. With saving off the agenda for many households, it looks like 2007 will repeat last year’s disappointing ISA sales.”