Investor sentiment hits new highs
At 6.5%, investor confidence – as measured by the Lloyds Private Bank investor sentiment index – is more than 5 percentage points better than at the same time last year. In spite of worries about valuation levels, US equities saw the biggest increase in confidence month-on-month, rising by 5.8%. The potential for significant tax changes looks set to support markets in the short-term.
Eurozone shares inspired similar confidence, increasing by 5.7%. However, the UK continues to be hit by poor sentiment, as Brexit negotiations drag on. It saw negative sentiment (-0.6%) over the third quarter.
Markus Stadlmann, chief investment officer at Lloyds Private Bank, said: “For the two other UK asset classes, investor confidence is improving with UK corporate bonds seeing a modest improvement of 1.5%, but positive sentiment has gained momentum in UK government bonds which leapt 3.3%.”
In spite of the turnaround in the Japanese economy, Japanese equities were also in negative territory at -0.4%, although this represents a 10.4% improvement in sentiment compared to the same period last year.
Stadlmann added: “Reinforcing the more buoyant investor mood, is the downward trend shown by gold, the traditional ‘safety asset’. Despite being an all-season asset class of choice for investors, it finishes the year as one of only three asset classes (out of 11) to end with an annual drop in sentiment (down 6.6%), as investors feel more confident seeking out riskier options.
All but two assets (UK shares and UK corporate bonds), provided positive returns over the month. US equities performed the best, increasing 2.7% since November. However, for the full year, Emerging Markets shares take the crown, having risen more than 29% year-to-date. Investor confidence increased to a level of almost +21%.