Investors are betting that consumers will return to everyday routines such as visiting the cinema © Vue Entertainment/PA

Investors are increasingly trading in and out of the “lifestyle stocks” most affected by the pandemic, as opinion divides over the prospects of an economic recovery in the UK.

As lockdown restrictions have been lifted, raising fears of a second wave of infection, travel and retail are among the volatile sectors seeing elevated levels of stock trading among private investors, according to investment platforms.

“[We saw] the re-emergence of travel, retail and luxury stocks as investors get excited over the prospect of economies reopening and air travel returning,” said Joe Healey, an investment analyst at investment platform The Share Centre.

Airline stocks are among those being traded heavily by UK investors, after share prices fell steeply in mid-February, regained some altitude in June, only to fall back again in recent weeks. From May to June, the number of trades in British Airways parent IAG at the Share Centre rose by 35 per cent, an increase of 589 per cent from February. 

Interactive Investor, another investment platform, said IAG was one of the 10 most traded companies among its investors over the past two months. The number of IAG trades was up 38 per cent on March and April, making it the fourth most traded company in July.

But investors are split over the prospects of a recovery. As early optimism over an economic reopening wears off, new travel quarantines have fuelled uncertainty. In July, 65 per cent of IAG trades were buys, compared with 73 per cent in March and April, according to Interactive.

“The airline industry is not out of the woods yet,” said Richard Hunter, head of markets at Interactive Investor. “The appearance of IAG in both buy and sell lists suggests that during this turbulent time it has become a trading stock for many of our customers.”

EasyJet has been a heavily traded share throughout the pandemic, and its share price remains more than 60 per cent down since the start of the year. Buys made up 72 per cent of trades in March and April, easing to 65 per cent in July.

Shares in “local lifestyle” sectors have seen a boost in interest from investors. Trading volumes in the heavily shorted cinema chain Cineworld have jumped 66 per cent since June, with an 80 per cent increase in buy orders compared with March and April, according to Interactive Investor.

“This highlights another optimistic play by investors on the successful reopening of the economy, as consumers start to return to everyday routines such as visiting the cinema or going for a drink at their local pub,” said Mr Healey. “Many believe local communities will show vast support for businesses in these industries as they look to survive in the current climate.”

However, increased investor caution is merited, analysts said. “The equity markets are far too complacent in terms of what lies ahead,” said John Cronin, an analyst at Goodbody, who notes that share price recovery has in part been driven by retail investors, especially for household-name brands.

When furlough schemes wind down, he said, the result will be increased unemployment, hitting travel and retail companies among others. “There's a false sense of security at the moment because many people haven’t been hit yet.”

The International Air Transport Association, the global airline trade body, this week said the industry will not recover its pre-Covid-19 status until 2024, a year later than it had originally predicted.

“Many leisure, travel and entertainment businesses are being propped up by bounceback loans and that's not an indefinite form of support either. Businesses will fail,” Mr Cronin said.

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