Lloyds Bank

Investor Sentiment Index - March

16 March 2017

  • Investor sentiment dipped slightly since February but continues to be buoyant despite geopolitical uncertainty.

  • UK equities have seen the biggest increase in confidence both this month (up 7.95%) and year on year (an increase of 25.97%).

  • UK property is the best asset class performer as it continues to rebound from the Brexit vote aftershocks

UK investor sentiment has dipped slightly in March, by 0.29% to 5.89%, but still remains at the second highest level since April 2016. 

Recent geopolitical uncertainty over Brexit is seemingly doing little to dent UK investor optimism, with UK and US equities both faring well. Over the past month confidence in UK equities has risen to 23.48%, with the asset class also recording the biggest rise year-on-year, with a 25.97% increase in sentiment over the last 12 months. 

Investor appetite for US equities has also picked up over the last 30 days, rising to 0.51% from a previous lacklustre -5.09% in February, as President Trump continues to talk up US business and investment opportunities.  

Investors are less encouraged by UK government bonds, as they suffered the biggest reduction in sentiment, a fall of 4.61%. This could be linked to speculation about possible interest rate rises, in parallel with rising levels of inflation.

Gold still attracts the overall highest level of investor confidence. Whilst it has seen a reduction in optimism this month, down by 4.44%, an increase over the past 12 months means that positive sentiment remains at extreme levels of 41.93%.

Asset class performance generally looks encouraging over a one, three and 12 month view with all figures in positive territory. Over the last month, UK property is the best performer, up 6.5%, followed by gold (up 3.5%) and US equities (up 3.5%).  Performing less well on a month-by-month basis are commodities which moved up slightly to 0.20%, while cash remained the same as February. Year-on year, the performance of US equities is up 22.9% and 18.4%% for commodities.

Markus Stadlmann, CIO Lloyds Private Bank:

“Investors remain largely undeterred by geopolitical uncertainty both in the UK and in the US, demonstrating renewed positivity towards both countries’ equity markets. The fact that UK property is the best performing asset class is indicative of the growing belief in national economic resilience, come what may.

The announcement of a £60bn UK Brexit fund to steady the economy during Brexit negotiations seems to be having the desired effect of reassuring investors, at least in the short term. Muted performance by commodities supports our current standing that the asset class should remain outside of our long-term investment strategy.

Given high valuation readings we are underwhelmed by US equities, despite general optimism. Investor scepticism towards UK bonds is interesting to note. Lack of confidence in fixed interest assets is increasingly based on structural dynamics as well as rising import prices.“

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