Investor sentiment hits a high despite weak asset class performance

23 March 2015

  • Overall asset class investor sentiment hits a high at 16%
  • Eurozone shares recorded the biggest monthly improvement in sentiment
  • Net sentiment is strongest towards UK property (+43%) and UK shares (+36%)
  • However, actual performance decreases for nine out of ten asset classes

March has seen overall average asset class sentiment reach a high, according to the monthly Lloyds Bank Private Banking Investor Sentiment Index. With continued improvement in overall asset class sentiment, net sentiment1 increased for seven of the ten asset classes surveyed with only a modest decline for the other three, leading to its highest overall score since June 2014.

However, in contrast to asset class sentiment, actual asset class performance decreased for nine out of the ten asset classes since last month. Japanese shares was the only asset class to record an increase from last month (+7%) in terms of performance, while it recorded the fifth largest rise for investor sentiment, increasing five percentage points (+5pp).

Monthly changes

Despite receiving the most negative sentiment of all asset classes (-33%), Eurozone shares recorded the largest positive month-on-month gain for the first time. With net sentiment increasing 13pp, Eurozone shares also saw the highest increase for the asset class since the survey began in March 2013.

Gold was the biggest net loser in March, dropping 5pp compared with February and saw its first negative swing since the start of the year.

Three out of the four sterling-denominated asset classes recorded a positive performance with UK shares rising 7pp, UK corporate bonds rising 4pp and UK government bonds rising 1pp. UK property saw a 3pp fall in sentiment, signalling its second dip this year.

Annual Changes

Half of the ten asset classes have seen a fall in net sentiment over the last year. The biggest declines have been for Eurozone shares (-19pp), UK property (-15pp) and commodities (-6pp). UK government bonds recorded the biggest improvement in net sentiment (+12pp). There have also been gains for Gold (+10pp) and US shares (+5pp).

Ashish Misra at Lloyds Bank Private Banking, said:

“The continued improvement in asset class performance paints a positive outlook for investors. Most notable is Eurozone shares, which has gained significant momentum, despite still displaying a highly negative sentiment. This could reflect the improvement in sentiment on account of the commencement of quantitative easing by the European Central Bank and some improvement in the overall macro-economic backdrop for the region despite ongoing challenges in the periphery.

“The positive sentiment towards UK shares is reflected in the pace of the UK economic recovery which remains solid. However, UK property shares are starting to ease following the recent housing market slowdown, which may lead to a slight tapering off of investor demand in the coming months.”

Asset Class Performance

In terms of an annual change, six of the asset classes recorded an increase, with Japanese shares (+28%), UK property (+17%) and UK government bonds (+10%) seeing the largest increases.  Commodities (-38%), Gold (-16%) and Eurozone shares (-9%) were the worst performers.

All of the four sterling-denominated classes saw an increase in terms of annual change with UK corporate bonds and UK shares seeing an increase of 7% and 2% respectively.