The US and Israel’s attack on Iran has thrown markets into turmoil, and the impact of the oil price shock is still reverberating.
Investors making Isa decisions are showing signs of scepticism about the US under Donald Trump’s unpredictable presidency, but it is unclear how this will play out during and after the war.
The growing realisation that investing in the US meant a concentrated bet on a handful of tech and AI giants has led many to spread their risk, according to the trends in best buy tables from the top DIY investing platforms.
Global funds with low exposure to the US, plus European, Asian and emerging market funds were on people’s shopping lists instead.
Investors with a well-balanced portfolio and a long-term strategy should as a rule keep calm and sit tight in times of global crisis – but that should not stop you opening or topping up a stocks & shares Isa.
Isas are a ‘use it or lose it’ opportunity as you cannot carry any unused allowance into the next tax year, says AJ Bell’s head of markets Dan Coatsworth.
He reminds investors that you don’t have to invest straight away, but can hold cash within a Stocks & Shares Isa until you are ready to make a decision.
Looking ahead: Investors making Isa decisions are showing signs of scepticism about the US, but it is unclear how this will play out following the war in Iran and the oil shock
New curbs on this practice are expected starting from April 2027, to prevent people trying to evade a cut to the cash Isa limit to £12,000 for under 65s. The details have not been announced yet, so for now investors can keep taking advantage of the current rules.
‘You might want to put money into an Isa and wait for volatile market conditions to calm down before investing.’ suggests Coatsworth.
‘Events in the Middle East have naturally caused investors to be more cautious, but future you might be thankful for feeding your Isa through bad times as well as good.’
The Isa investing bestseller tables below are based on net flows of cash into active and index funds, investment trusts and stocks in the two months to the end of February.
Dump Trump trade shows up in fund choices
The US has dominated many people’s investment portfolios in the past decades because it is the world’s biggest market and has seen stellar growth, led by its tech giants.
But there is a trend towards fishing in other seas, including the UK, Europe, and emerging markets, according to Coatsworth.
‘We saw a shift in behaviour last year when Donald Trump returned to the White House. The most popular active fund in January and February was Artemis Global Income (ongoing charge: 0.84 per cent) which has less than 30 per cent of its assets in North America.’
He says this is unusual for a global equities fund, as the US typically dominates this space, with the MSCI World index having a 70 per cent weighting to North America.
‘Artemis Global has one third of its assets in Europe and 27 per cent in emerging markets, a balance that chimes with what many investors are now looking for.
‘The XTrackers MSCI World ex-USA ETF (ongoing charge: 0.15 per cent) featured on the most popular passive funds list for a similar reason. It explicitly excludes the US from its investment universe, providing investors with a Trump-free way of getting global exposure.’
AJ Bell also notes some opportunistic buys by stock investors, who have pounced on share either down on fears about AI disruption or because of negative news.
‘Anthropic’s legal AI plug-in knocked RELX for six, with £20billion wiped off the latter’s market value in a matter of weeks as investors worried about part of its business potentially being made redundant by new AI technology,’ says Coatsworth.
‘Sentiment eventually started to turn as investors took the view the shares had fallen too far, with RELX then staging a comeback.
‘Microsoft and Amazon have also seen share price losses this year, and feature on the most bought lists. These investors might be taking the view that Microsoft and Amazon are giants of industry and will continue to prosper for decades to come.’
Asia, emerging markets and precious metals are popular
Investors are looking to diversify portfolios die to heightened market volatility over the past couple of months, says Hargreaves Lansdown’s chief investment strategist Emma Wall.
Concerns about trade tariffs, uncertainty surrounding the US Federal Reserve and its future moves on interest rates, and geopolitical risk are driving this sensible approach to adding resilience to investments, she reckons.
Wall also notes the move away from the US, saying: ‘After years of tech and US equity dominance, the most popular funds and investment trusts have an Asia and emerging markets tilt, and precious metals make it into the top 10 most ETFs and trackers.
‘Both of these trends are momentum driven, as these sectors have delivered strong performance over the past year, but are still a welcome addition to narrowly invested portfolios to help mitigate volatility.
‘Investment trust buyers are also looking for diversified sources of income, including bonds and renewable energy.’
The trend of buying or topping up positions in stocks taking a hit from concerns about AI disruption is also evident in Hargreaves’ bestseller tables.
Investors ‘not overly alarmed’ by talk of AI bubble
Like other platforms, Fidelity International has detected signs investors are more inclined to spread risk geographically.
Broad-based funds such as Vanguard FTSE Global All Cap Index (ongoing charge: 0.23 per cent) and HSBC FTSE All World Index (ongoing charge: 0.13 per cent) are popular choices,’ says pensions and investment specialist Jemma Slingo.
She also highlights investors’ liking for actively-managed global funds including Dodge & Cox Worldwide Global Stock (ongoing charge: 0.63 per cent) and Artemis Global Income.
Meanwhile, Slingo notes the appearance of Lazard Emerging Markets fund (ongoing charge: 0.89 per cent ) and Fidelity Emerging Markets investment trust (ongoing charge: 0.81 per cent).
‘The renewed appetite for emerging markets comes after a period in which several overseas markets, including parts of Asia and emerging economies, outperformed the US.
‘Investors appear to be seeking longer-term growth opportunities and more attractive valuations outside Wall Street.
‘It is also notable that Schroder Japan Trust (ongoing charge: 0.92 per cent) featured among the best-selling investment trusts.
‘Japan has been one of the stronger-performing developed markets in recent periods, and investors seem increasingly willing to allocate capital to regions benefiting from structural reform and corporate governance improvements.’
Slingo says the prominence of US technology giants suggests investors have not been overly alarmed by rumours of an AI bubble.
‘Technology-focused investment trusts such as Scottish Mortgage (ongoing charge: 0.31 per cent) and Polar Capital Technology Trust (ongoing charge: 0.75 per cent) also suggest this.’
RELX targeted by opportunist investors after software scare
Investors are still keen on precious metals and appear unfazed by volatility in silver and gold prices earlier this year, says Interactive Investor’s funds expert Kyle Caldwell.
But he warns: ‘It’s worth bearing in mind that while the sell-off proved to be short-lived, the sharp falls serve as a reminder that the prices of both precious metals can fluctuate rapidly.
‘Two other trends among investors are demand for value-focused funds and specialist strategies with high yields. Value-focused funds attracting attention include Artemis Global Income and Temple Bar (ongoing charge: 0.61 per cent).’
On the stocks front, II says heavyweights like Legal & General and Diageo, miners like Glencore and defence stocks like Rolls-Royce are among its top sellers.
II also remarks on the popularity of IT services and consulting firm RELX, echoing other investing firms in noting how opportunistic customers jumped in following the software sell-off sparked by the launch of Anthropic’s new AI tools. However, the stock has not yet regained its January highs.
DIY INVESTING PLATFORMS
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