How AJ Bell DIY investors navigated the Liberation Day sell-off and recovery

The way individuals responded to the market sell-off depended on their own personal circumstances. However, there were clear trends among AJ Bell’s DIY investors who felt confident enough to buy in the week after Trump’s big speech despite stock markets falling by a considerable amount in the first three trading days after the event.

With so much uncertainty around which countries and companies would be winners and losers, investors took a broad approach by casting their net as wide as they could via global equity market tracker funds. HSBC FTSE All World Index and Fidelity Index World were among the most popular fund choices, offering low-cost exposure to stock markets around the world.

When markets are rocky, it’s natural to look back at investments that previously did well, hoping their time in the sun will come around again. US equity tracker funds such as Vanguard S&P 500 ETF and chip giant Nvidia might have gone off the boil this year, even before Liberation Day, but they’ve generated strong returns in preceding years. Investors might have pounced on the opportunity to buy at a much cheaper price than seen for a while.

Finally, investors scouted for opportunities for stocks that might not be the most exciting, but ones which may be able to ride out the storm.

Barclays was the most popular UK-listed company for AJ Bell DIY investors in the fortnight after Liberation Day. Banking shares initially fell as investors worried about the prospect of a global economic slowdown and how that might translate into lower demand for lending, and a rise in bad debts for those who have already borrowed money.

In Barclays’ case, its exposure to investment banking also made it a potential loser from the trade war if that led to ongoing market volatility and a reduction in M&A activity, curbing its income for deal advice and fundraising. Certain investors might have taken the view that the shares had fallen far enough whereby the risk/reward ratio favoured buying.

What AJ Bell customers have done since markets started to recover

The low point for global stock markets was 8 April, as measured by the performance of the FTSE All World index. Since then, we’ve seen a gradual recovery, albeit not a smooth one.

The fact we’ve now seen two weeks of markets in a general upward trend is noteworthy. It suggests investors are no longer panicking and there is a much calmer mood across markets. This sort of backdrop is conducive to people looking for investment opportunities.

Certain popular names from the first week of the sell-off remained high up investors’ shopping lists as markets staged a recovery, including global equity market tracker funds, high-yielding stocks such as Legal & General, and former market superstars Nvidia and Tesla.

A gold tracker fund also shone for investors, rising up the ranks of the most popular investments on the AJ Bell platform as the precious metal price hit new highs. UK equity market tracker funds slipped down the list.

The biggest shifts were the sharp increase in popularity for US equity market tracker funds and the appearance of several technology-related funds and investment trusts in the top 20 list during the Liberation Day market rebound period. That implies investors are regaining their appetite for risk and wanted to pounce on tech-related names that were on sale.

Not everyone was taking their chances, however. High up the most popular investment list for AJ Bell customers was Vanguard LifeStrategy 80% Equity. The 100% equity version had appeared in the most-bought list during the initial market sell-off, but the 80% was far less popular in that period.

Once markets started to recover, the 80% Equity version of the LifeStrategy fund soared in popularity. This suggests certain individuals were keen to hedge their bets and have a broad product that provided 20% bond exposure and 80% share exposure. The exposure to bonds implies certain individuals have become more cautious and don’t want to go all-in with shares in case there are more nasties around the corner regarding the trade war.