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Investor confidence rises for third month in a row

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Investor confidence rose for the third month in a row, with investors most bullish about the prospects for US shares, according to Hargreaves Lansdown.

Having hit a record low of 59 points in October, the Hargreaves Lansdown Investor Confidence Index now stands at 80 points, after three months of gains. However it still remains some way off the long-term average of 100.

In terms of regions, with a confidence score of 68% DIY investors had most confidence in the prospects for US stocks, with Asia Pacific coming a close second with a score of 65%.

Hargreaves notes both these markets have markedly different backdrops, with the US stockmarket coming from a period of relative strength, and the Asia Pacific market coming from a period of relative weakness, in valuation terms.

Investors are least confident about the prospects for Europe, which has a confidence score of 51%. (A score above 50% shows positive sentiment, below 50% shows negative sentiment).

While Investor confidence is gradually edging up, Laith Khalaf, a senior analyst at Hargreaves Lansdown, noted there remains “a lot of caution in the air”.

“That’s understandable, as a number of dramas are unfolding this year, including elections across Europe, the evolution of the Trump presidency, and of course the start of the UK’s withdrawal from the EU,” he added.

Despite these concerns Khalaf said the long term investor should still have a “healthy slug of equities” in their portfolio to generate real returns, particularly with a bout of inflation on its way.

He said: “Cash returns remain woeful, and indeed NS&I just announced further interest rate cuts to four of their variable rate products, so there is little sign of this situation materially improving.

“Bond yields have picked up since their low in August, following the Brexit vote, however they still carry a fair degree of risk in exchange for a pretty limited return.”