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Brexit fallout: investor confidence sinks to four-year low

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Investor confidence has sunk to a four-year low following the Brexit vote, according to a survey by Hargreaves Lansdown.

The Hargreaves Lansdown Investor Confidence Index, based on a survey of retail investors, which took place on 30 June, suffered its sharpest monthly fall in five years, dropping from 92 points in May to 67 in June, the biggest one-month percentage fall since June 2011.

The index measures investors’ views of the UK stock market over the next three years.

It reached a record low of 61 in May 2012 when it looked like Greece was on the brink of leaving the eurozone.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said:The immediate response to Brexit appears to be a collapse in confidence, across investors, consumers and businesses. The dwindling faith in the UK’s future financial prospects has the potential to become a self-fulfilling prophecy, if companies and individuals start to assume a bunker mentality, and delay or cancel spending and investment.

“Investors are naturally twitchy about what Brexit means for the future of the stock market in the coming months and years. However continued low interest rates will remain supportive of shares, not least because there is really nowhere else for investors to go for income. Commercial property is one other option, though we have seen problems that can arise for investors in that market over the last week or so.”

However, Khalaf cautioned about assigning too much significance to one month’s survey data, particularly so close to the EU referendum result.

He said: “Instant reaction to such a momentous decision is probably not an accurate barometer of more considered, longer term responses, which will ultimately impact on the stock market and the economy.

“When evaluating confidence surveys we should therefore wait for a few more data points before establishing a trend, as it’s a particularly imprudent time to be extrapolating in straight lines.”

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