Investor positivity plummets to near record lows

20 January 2016

  • Investor sentiment drops to its second lowest level since July 2013.

  • Actual market performance drops on all ten asset classes compared with the previous month.

  • Some investors still favour UK property and gold, and could be failing to consider lower risk investment opportunities in fixed income assets like bonds.

This month’s Lloyds Bank Private Banking Investor Sentiment Index shows how UK investor sentiment has dropped throughout December to its second lowest level (4.55%) since July 2013. Only September 2015 (3.23%) recorded lower levels of investor confidence during this time, which was driven by the initial concerns about the slowing of China’s economy and the impact of currency devaluation.

Over the last month, the actual market performance of all ten asset classes declined, with commodities leading the way with another huge drop in performance of 8.6%. See table 2. With concerns about China’s economy still ongoing, sentiment towards all individual asset classes also declined month-on-month, with the exception of UK property and gold. These two asset classes bucked the trend with small rises in sentiment of 1.88% and 2.04% respectively.

Markus Stadlmann, Chief Investment Officer at Lloyds Bank Private Banking, said:

“Investors are feeling particularly gloomy at the moment, with asset class performance dropping off as we start 2016.

“Given declining market performance and falling levels of sentiment, it is surprising to see sentiment towards bonds also falling. But, by sticking to familiar investments like property and gold; some investors might be missing the potential opportunity offered by lower risk fixed income assets such as bonds.”

When comparing the year-on-year changes in sentiment, only UK property has increased its positive position, with a substantial 12 percentage point rise over 12 months, taking it to a very high level of 50.05%. Eurozone equities have also improved levels of sentiment in this time (rise of 9.06%), but sentiment towards this asset class remains extremely negative at -33.75%.

In contrast, emerging market equities have fallen out of favour. Last month they were regarded positively with a sentiment of 6.04%, whereas this month, the sentiment turned negative to -5.75% (a fall of 11.79%). Sentiment towards the asset class also fell 15.11% year-on-year, the biggest fall across all the asset classes.

Despite their 10.7% growth in actual market performance, Japanese equities are still failing to impress the UK investor; the sentiment reading of -14.31% is the poorest since its record low in this survey, also registered in September 2015.