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UK stocks back in favour despite concerns over economic outlook

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UK stocks are back in favour with private investors despite concerns over what the UK economic landscape will look like in the coming months.

According to Lloyd TSB’s Investor Outlook survey, investors now cite economic recovery as their primary investment concern. This replaces inflation as the primary concern 12 months ago.

Inflation now ranks third after recently falling to its lowest level in nearly three years.

The survey revealed that despite concerns towards growth, over a fifth of private investors believe UK stocks have a positive outlook in the next six months, the highest positive sentiment across all asset classes.

Ashish Misra, head of investments at Lloyds TSB Private Banking, said: “We are seeing visible improvements in a range of measures such as employment, retail sales, house prices and inflation, which is whetting investor appetite for UK assets and particularly UK stocks.”

19% of investors plan to increase their equities exposure in the next six months, while 16% have already done so since March 2012.

Half of investors rate the outlook for Eurozone investments as negative, despite the heavy discounting that has taken place since the start of the Eurozone debt crisis.

Sentiment for recovery in the UK economy is also negative, with 43% thinking things will get worse and 19% voting favourably.

However, this doubles in relation to the next three to five years, with over a third, or 36%, having a more favourable outlook in this timeframe.

Misra added: “In terms of the prospects for UK stocks, improving fundamentals in the economy and relatively low prices in some areas make these assets quite attractive.

“UK equities have under-performed their US and European counterparts for much of the past 12 months, which combined with improving fundamentals, leads one to a fairly optimistic outlook.”

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