Investor sentiment is now at its highest level this year according to the latest figures from the Lloyds Bank Investor Sentiment Index.
Despite ongoing market volatility and continued uncertainty, investor confidence continues to climb. This follows on from August’s encouraging figures which saw investor sentiment rebound, after a sharp fall in July, in the wake of the EU Referendum vote.
The increase in investor confidence in the UK is apparent in the fact that all UK asset classes increased in sentiment in August. UK property and UK equities saw the biggest increase in sentiment month on month (14.79 and 7.09 percentage points respectively) whilst attitudes towards the foreign and typically more risky assets dipped despite two months of improved sentiment. US, emerging market and in particular Japanese equities all suffered declines in sentiment following on going speculation around currency, interest rates and monetary policy.
However, gold still maintains its leading position as the preferred asset class (with a positive sentiment of 41.26%) with last month’s decline levelling off. Investor’s compulsion to still shelter in safe heavens could be indicative of a greater scepticism about the longer term prospects for the UK.
Markus Stadlmann, Chief Investment Officer at Lloyds Private Banking, says:
“Despite continued market volatility all UK asset classes have increased in sentiment during August, signaling that investor confidence in the UK economy is rebounding at least in the near term. Whilst the UK looks more resilient in the short-term, there remain plenty of reasons for investors to be cautious. The UK remains in a difficult situation with no simple solution. It is unlikely that the UK will slip into a recession, but we may well see a cap on growth. We are still yet to see any real shift in monetary policy emerge globally, just a repeat of the same central bank actions. More expansive policies could, over an extended period of time, prepare the ground for a new bull market.”
Actual percentage change in the performance of the asset classes over the past month has been minimal. Gold interestingly, experienced the greatest month on month decline, falling 3.4% whilst UK corporate bonds, commodities and government bonds were the strongest performers at 2.3 percentage points, 1.8 and 1.5 respectively.