Lloyds Bank

Investor Sentiment Index - April

24 April 2017

KEY POINTS

  • Investor sentiment has again dipped since March but is still significantly higher than this time last year

  • UK equities saw the biggest drop from 23.48% to 9.06%

  • Investor sentiment mirrors asset class performance which is also up year-on-year, although down on last month.

APRIL ANALYSIS

UK investor sentiment has dipped again in April, by 1.65% to 4.25%. However, sentiment is still significantly higher than it was this time last year, when it was -0.24%, suggesting that investors remain relatively upbeat especially when looking at opportunities around the world.

Investor positivity towards UK-listed companies fell significantly this month by 14.42% to score at just 9.06%. This decline in popularity coincides with the formal triggering of Article 50 which may have led to investors becoming more cautious towards UK equities while they wait to see the political and financial market reactions play out.

The fall was not reflected in actual performance which saw UK equities improving by 0.9% for the month, and 17% for the year.

Investor sentiment towards European equities also rose by 12.29%, from -34.40% to -22.11% suggesting  that investors are increasingly less concerned by Europe’s own geopolitical uncertainty. In fact, sentiment towards European equities is up 14.20% year-on-year.

 Actual performance of asset classes is positive over a 12 month view. All assets classes have seen a rise over the last year, apart from UK property which is down 2.7%.However, looking at last month’s performance, it is a less positive picture. Six out of the 11 asset classes have experienced deteriorating performance in the last 30 days. Commodities saw the biggest drop falling 3.9%. Nevertheless, Eurozone equities and emerging market equities are the best performers on a month-by-month basis up 5.6% and 3.5% respectively.

Markus Stadlmann, CIO, Lloyds Private Bank said:

"April saw a further reduction in sentiment from March with the most dramatic drop being in investors’ sentiment towards the UK. Despite this, we still remain fairly positive about the overall health of the UK economy in 2017.

"In light of Theresa May’s decision to seek a General Election, the volatility of UK equities and bonds could be elevated over the short-term.  Overall however, we remain optimistic as a long-term investment strategy (rather than short-term distraction) is key.

"The outlook for global earnings is relatively bright and it is also clear investors are looking further afield for opportunities due to the uncertainty facing the UK.  Sentiment towards emerging market shares, closely followed by Japanese equities, shows the biggest increase over 12 months. Conversely, a dip in sentiment towards the US is not that surprising, as the market awaits progress with President Trump’s policies.

"This month’s investor sentiment tallies with our longer-term investment strategy. The fading investor appetite in April for UK corporate bonds, UK government bonds, and UK property, is in line with our recent decision to reduce strategic allocations to those asset classes. However, we agree with the warmer reception that investors are giving to international opportunities, having recently increased our exposure to global equities."

 

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