Investor sentiment towards UK government bonds sees largest fall as US shares reach all time high

20 April 2015

  • For the second month in a row, investor sentiment towards Eurozone shares improves – but still sits in negative sentiment
  • Actual market performance increases for all ten asset classes leading with UK property rising 7%

April has seen the largest fall in sentiment towards UK government bonds, according to the monthly Lloyds Bank Private Banking Investor Sentiment Index. Net investor sentiment1 for the asset class declined five percentage points (-5pp) from last month to 16%.

UK corporate bonds has also seen a decline in sentiment amongst surveyed investors to 14%, a monthly decrease of 3pp. Sentiment towards UK and international shares, on the other hand, remains strong with investor outlook for UK shares sitting at 37%. US shares has edged up to 19% together with Emerging market shares, increasing 3pp from last month. Amongst all asset classes, sentiment towards Eurozone shares recorded the largest monthly improvement of over 5pp, but the net balance remains in negative territory (-28%).

Net sentiment remains strongest for UK property, increasing nearing 5pp in April to 48%, whilst Gold holds a net sentiment of 27%.

However, market returns show several asset classes performing well in the past month. In contrast to waning sentiment for some asset classes, market performance, in terms of returns earned, increased for all of the ten asset classes. UK property saw the largest monthly increase in returns of 7%, followed by Eurozone shares (+6%), UK shares (+6%) and Emerging market shares (+5%). UK corporate bonds (+1%), Commodities (+1%) and UK government bonds (+2%) provided investors with the lowest total returns in the past month.

Monthly changes

Despite receiving the most negative sentiment of all asset classes (-28%), Eurozone shares recorded the largest improvement with an increase of over 5pp. Eurozone shares also saw the highest increase for the asset class since the survey began in March 2013.

Annual Changes

Half of the ten asset classes have seen a fall in net sentiment over the past year. The biggest declines have been for Eurozone shares (-18pp), UK property (-11pp) and Commodities (-6pp). Gold recorded the biggest improvement in net sentiment (+7pp). There have also been gains for Emerging market shares (+4pp) and US shares (+2pp).

Ashish Misra at Lloyds Bank Private Banking, said:

“Overall asset class performance paints a positive picture for investors as the average change has shown a steady increase since the start of the year. Interestingly, as UK government bonds decline, US shares have hit their survey high.

 “However, Eurozone shares, despite gaining significant momentum, continue to display a highly negative sentiment. This momentum could reflect the quantitative easing by the European Central Bank. As the currency falls, sentiment towards the asset class has gone up with increased export and job prospects.”