A 2015 Review: Asset Class Winners and Losers
- Actual market performance shows Japanese equities and UK property to be top performers in 2015.
- Commodities and gold are the two assets that have seen the greatest declines in actual market performance compared to this time last year.
- UK investor sentiment remained more positive towards familiar UK based assets, regardless of actual market performance.
This month’s Lloyds Bank Private Banking Investor Sentiment Index shows how UK investor sentiment has changed throughout the year, with sentiment not necessarily aligning to the actual performance of many asset classes.
2015’s asset class winners
Japanese equities were the big success story in 2015, with actual market performance up 15.1% year-on-year, but the UK investor sentiment towards them remained stubbornly negative for most of 2015. Following a brief period of positivity in late spring, the sentiment number has fluctuated between -1% and -20% since July this year. See table 1.
In contrast, UK property has consistently been the most popular asset class throughout 2015, with sentiment extremely high at around the 40-50% mark throughout the year. See chart 1. This is reflective of the actual market performance year-on-year which is 10% higher, although performance is slightly down over the last six months (-0.9%). See table 2.
2015’s asset class losers
Investor sentiment has started to agree with the markets about commodities. Towards the end of the year, sentiment finally became negative finishing at a generous -1.5% (down 9.11% compared to a year earlier) against a backdrop of huge declines in commodity prices and oversupply. The actual market performance is down 40% year-on-year, making commodities the worst performing asset class in 2015.
Actual market performance of gold fell 12.2% year-on-year, but it continues to be seen as a relatively ‘safe’ investment. As such, gold commanded positive sentiment of between 11% and 36% across the year, with sentiment now standing at 19.63%, only reducing by 3.01% in the last 12 months.
Markus Stadlmann, Chief Investment Officer at Lloyds Bank Private Banking, said:
“The results of the Investor Sentiment Index show that whilst there have been some real winners and losers when it comes to the actual performance of asset classes over the last year – sentiment doesn’t always truly reflect reality. At times such as these it is more important than ever for investors to be well informed and advised on the latest global issues and trends in order to help ensure they maximise the performance of their portfolios, particularly over the longer term.”
Sentiment vs. performance in 2015
Sentiment among UK investors for UK equities remained very positive all year and rounds off 2015 with sentiment at a robust 26%, albeit below the summertime highs of 40%. The actual asset class performance of UK equities is down year-on-year by -2.7%, but the asset class has staged something of a recovery in the final quarter of 2015 (2.7% over last three months) as reasonable UK economic growth appears to be holding up.
The reverse has been true of investor sentiment towards eurozone equities, with sentiment levels at -48% in summer during the nervousness around a potential Greek exit. For the final quarter however, sentiment has trended around the -30% mark as the Greek situation has been dealt with for the time being, but the eurozone recovery still looks weak. Actual market performance is down 4.5% year-on-year, so this negative sentiment is justified.
Investors have seen US investments in positive light for the entire year. The actual market performance of this asset class has been less volatile than other markets (-0.1% year-on-year) as the US economy has shown signs of recovery.
In contrast, emerging market equities were very much in favour at the beginning of the year but were deeply unpopular in summer around the time of the unexpected Chinese devaluation. Although sentiment towards emerging market equities is still positive, it has declined by 10% year-on-year. The actual market performance of the asset class has declined by 6.5% year-on-year, with most of the damage done in the summer months.
A year of uncertainty is reflected in the consistently positive sentiment towards both UK corporate and UK government bonds. UK government bonds’ actual market performance nudged up 0.9% year-on-year, while UK corporate bonds have actually declined by 2.0%.