Gold and UK property remain popular in the current market, with commodities seeing the greatest monthly increase in confidence
As a result, investor sentiment on commodities turns positive for the first time in six months
Riskier and unfamiliar asset classes continue to generate negative thinking
The latest figures from the Lloyds Bank Investor Sentiment Index show that investor confidence has risen slightly since last month’s record low reflecting, in part, an improvement in the actual market performance of all but two of the asset classes.
On the whole, ongoing nervousness in the markets has contributed to a continued cautious response from investors. It appears that the safer and well-known havens of gold, the price of which is at a 21 month high, and UK property remain high on the investment agenda.
Commodities are now back on the table with investor sentiment turning favourable for the first time since November 2015. Ongoing volatility in sentiment towards emerging market equities has also continued, with this month seeing a positive swing of 4.39%, potentially showing a more short term preference for this asset class.
However, despite an improved picture, investor sentiment is more negative towards the more unfamiliar and riskier asset classes, regardless of their performance. Investors seem to have little confidence in UK government bonds and UK corporate bonds at the moment, whilst Eurozone and Japanese equities have the lowest confidence ratings across the board. US equities have also now crept into negative territory.
Markus Stadlmann, Chief Investment Officer at Lloyds Private Banking, says:“Investor sentiment has become more positive for most asset classes, albeit from a low base. There are growing reservations about investing more money in equities, with the exception of emerging markets. UK Gilt and corporate bond sentiment has fallen considerably, which probably reflects concerns about whether they can deliver positive returns in the future.
“Although they remain popular with investors, the safe haven assets of gold and domestic property have both seen a slight fall in sentiment over the last few weeks. Commodities and emerging markets have both seen improvements in sentiment, a reflection that perhaps UK investors think both of these asset classes are over the worst.
“Whilst we monitor monthly sentiment changes – we stand by our long term approach to investing and exercise a strategic approach that helps clients avoid short-termism.”
The majority of the asset classes have shown positive performance over the last month, with only Japanese equities and UK government bonds seeing month on month declines of 2.8% and 1.7% respectively.
Year-on-year changes paint a bleak picture with price falls, some significant, across all but two of the 10 asset classes for which we monitor investor sentiment. Gold continues to be the main outlier with a twelve month rise in value of 6.3%. The greatest decline was unsurprisingly in commodities with a 28.5% collapse in prices.