Millennial investors opted for US and Health stocks in Q3 as they brace their finances for a winter recession, according to new data from smart money app Plum. 

The three months to September 2022 saw a notable increase in the allocation of funds to American Dream, which tracks US firms from the S&P 500. American Dream took 15.49% of investment in September 2022, up from 11.94% in July.

Healthcare inflows have continued to rise among customers as investors view it as a defensive option in the current economic climate. The Medic, Plum’s health fund, now takes just under 10% (9.89%) of allocation, though this is slightly lower than a peak of 10.45% in July. Looking back to January 2022, only 4.96% of inflows at that time were invested in The Medic.

Investment in British companies meanwhile has remained stable through a summer of uncertainty. Inflows to the Best of British, a fund tracking the performance of the FTSE All-Share index, remained at around 3% from July (2.99%) until the end of September (2.82%), which is nearly double the share it had at the start of the year (1.65% in January 22).

Meanwhile, Plum’s Tech Giants fund, which tracks the largest global technology firms like Apple, Microsoft and Alphabet, has seen its allocation shrink over time. While Tech Giants continues to take the largest share overall, 2022 has seen a notable reduction as customers choose to invest more in other funds. Tech Giants took 39.44% of the share in September, a substantial drop since the beginning of 2022 when it was taking close to half the total share of investments (48.76% in January 2022).

Commenting of the findings, Victor Trokoudes, CEO and Co-founder of Plum says:

“It’s interesting that the funds tracking the S&P 500 seem to be coming into favour with our customers who will have benefited from the recent improvement in market performance. Perhaps this reflects a view of the US market as the global crucible of wealth creation and a belief that the Bank of America is getting closer to the end of its rate-rising cycle. Healthcare continues to grow its inflows too, as customers consider this an essential defensive sector during unstable times. 

“Our Best of British fund is more popular than it was, reflecting how the FTSE All Share index has fallen less than many other major market indices. It features value companies that have increasingly come into favour following global events this year, such as miners and energy stocks, while missing the fast-growing tech companies that have struggled against a backdrop of rising interest rates. In fact, the UK features the best-performing developed stock market this year in local currency terms. With many of these FTSE companies providing dividends as well, they offer an opportunity to fight back against rising inflation. It will be interesting to see if our investors’ behaviour changes again in the last quarter of 2022 following the turbulence in the UK economy.

“In general we’re seeing increased diversification as funds which previously dominated, like Tech Giants, lose out to other funds. This is a smart strategy when times get tough; as the recent turmoil at large tech companies like Meta has shown, no company or industry is a safe bet, even when they wield a lot of influence. Younger investors like those we have at Plum are also learning that the biggest names are not always the best choice.

“As volatility continues, we’re pleased to see our customers continuing to keep calm and largely focus on the long-term horizon. Growth is all about the big picture and dramatic events often become small bumps in the road for those who remain focused on the destination.”

Plum currently offers 12 different investment funds, which cover a range of different sectors and mirror the performance of stock indices, via a Stocks and Shares ISA or General Investment Account. The app recently launched commission-free investing in the UK, offering access to 1500 US stocks, with another 1500 stocks added soon. Plum is a popular choice for millennial investors, with around 75% of customers under the age of 35.