Investor confidence hits 21-year low
The Hargreaves Lansdown Investor Confidence Index fell 13% to 59 points in November, the lowest level since the index began in 1995. The previous low of 61 points was recorded in March 2008, while the record high was 129 in January 2004.
The November survey was conducted between 1-7 November so includes the run up to but not the result of the US election.
Three out of the ten worst months in the index’s 21-year history have been in 2016. However, the FTSE All Share has returned 13% so far this year, and in October reached a record high.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “So far in 2016 investors have been buffeted by a commodity collapse, the Brexit vote, and most recently the US election, so it is little wonder they are feeling cagey right now.
“The conundrum however is that the stock market and confidence seem to be moving in opposite directions. There is some sense in this because as stock prices rise, investors become warier of a subsequent fall.
“This is probably exacerbated at the moment because central bank policy has made investors suspicious of a peacock market, which is all puff and no substance.”
While the price put on the UK stock market has moved up ahead of earnings in recent years, valuations are still close to their historical average, and are way below the euphoric heights witnessed in 1999 prior to the tech bubble burst.
“This suggests it is not a bad time to invest if you are in it for the long term,” said Khalaf.
“Monetary policy looks set to remain supportive for a considerable time to come, and the Bank of England is unlikely to change tack until economic growth is more robust, which should in turn help company earnings.”
Options for cautious investors
Struggling savers fed up of dismal cash rates and wary of rising inflation may be considering a move into investing.
While it may seem a daunting experience, there are a number of options available.
“One way of smoothing out volatility is to invest in the stock market on a monthly basis, which means automatically buying on any dips,” said Khalaf.
“Another strategy is to invest in funds which take a conservative approach, with a focus on capital preservation and sheltering you from the worst of any market falls. Two such funds are Newton Real Return and Pyrford Global Total Return.”