Polish investors are preparing for phantom rate cuts

Almost ¾ of Polish individual investors (74%) have balanced or plan to balance their portfolios this year in anticipation of expected interest rate cuts. This is a higher percentage compared to 51%. investors globally, adapting their strategy in the light of changing economic conditions - according to data from the latest Individual Investor Pulse study of the platform eToro.

In a nutshell:

• As announced by the president Glapiński, the chances for rate cuts in Poland are small. In the USA, the reductions are expected to take place in the summer.
• About 74 percent Polish individual investors have rebalanced or plan to rebalance their portfolios this year in anticipation of expected interest rate cuts (compared to 51% globally).
• Nearly 31 percent Polish individual investors intend to take profits or limit future investments in seven large technology companies (compared to 27% globally).
• The most common changes in assets will involve increasing the allocation to stocks and reducing the cash holdings.

Older investors are less flexible

Younger investors lead the way in this respect: 81 percent. Polish investors aged 18-34 declared that they had already made or will make changes to their portfolio before the interest rate cuts, compared to only 60 percent people over 55 years of age.

Among those who plan to rebalance their portfolios, the most common change in asset allocation will be increasing investment in shares (43% in Poland and 48% globally), followed by keeping less money in cash (39% in Poland and 36% . in the world).

When it comes to more specific preferences, 31 percent Polish investors declare their willingness to switch to high-yielding dividend stocks, and 25 percent will allocate more money to small-capitalization shares, i.e. the so-called small-caps (the smallest 15% of shares on the market). Almost a quarter (24%) will spend less money on shares of "large technology companies."

Commenting on the data, eToro markets analyst Paweł Majtkowski says:

Despite President Glapiński's announcement that there will be no rate cuts in our country this year, Polish investors are preparing their portfolios for such an eventuality. In addition, investors surveyed by eToro are more willing to reshuffle their portfolios than investors from other countries. In the context of the lack of price cuts, these are moves that can be described as "phantom". However, I believe in the rationality of most investors who, in the context of increasingly lower inflation, which dropped to 2,8% in February, probably believe that the RRP - despite statements to the contrary - will have to cut rates. After the recent rate cut in Switzerland, investors are also waiting for cuts in the US and the euro zone.

According to a survey conducted among 10 individual investors in 000 countries, more than one in four retail investors in Poland (13%) plans to reduce investments in the so-called The "Magnificent Seven" large technology companies in 31. Thus, slightly ahead of the global trend, 2024%. investors around the world declare the same. About 27 percent Surveyed investors in Poland said they planned to sell part of their shares in the "Magnificent Seven" (which includes Amazon, Apple Lossless Audio CODEC (ALAC),, Microsoft, Meta, Tesla, Nvidia and A) and reduce the overall allocation. About 1 in 5 (20%) plan to invest less in these market-dominating stocks. Despite this, as many as 34 percent investors plan to invest more in the above-mentioned companies this year than last year (compared to 23% worldwide).

The findings of eToro's Individual Investor Pulse follow a blockbuster 14 months for these seven companies. The total price of their shares increased by 90%. from January 2023. These results also come ahead of several projected interest rate cuts in 2024, intended to support a recovery in other, more cyclical sectors of the stock market.

Majtkowski adds:

Rate cuts are of great importance for investors in the largest technology companies. The Fed will probably make cuts in June or July, which will support the American economy and ensure an increase in profits and stock market valuations. This will result in a market rotation away from the US and large technology companies towards more economically sensitive and cheaper sectors such as real estate, small-caps, Europe and emerging markets.