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Investor confidence towards UK dives in September

Paloma Kubiak
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Paloma Kubiak

Investors are less confident about investing in the UK than they were in the aftermath of either the general election or the Brexit vote, the leading investor confidence index reveals.

Sentiment towards UK equities, UK government bonds and UK corporate bonds all fell in September, according to the latest Lloyds Private Bank Investor Sentiment Index.

It showed that confidence in the UK equities sector was the biggest loser, coming in at 1.55% – its lowest standing for 18 months.

Lloyds said uncertainty about the UK’s Brexit deal may have contributed to the fall.

It found that UK investors are also less optimistic about US equities compared to this time last year, down 9.91% to -2.17% off the back of reports the market may be due a correction from its recent peak.

European equities fared much better, with sentiment at its highest since Lloyds started tracking the index. Despite still being in negative territory at -5.78%, this is the only asset class with a double-digit jump (up 31.40%) when compared to the same time last year.

Gold saw an increase in sentiment this month (2.67% rise) and was the most popular asset class this month (43.61%). Cash, on the other hand, has seen the biggest dip this month (5.50% down) and is now at the lowest level it has been since November 2016, which Lloyds said is “unsurprising” given the continued low interest rate environment.

As investors look beyond the UK and US, they are more confident on Japanese equities (19.8%) and emerging market equities (18.5%).

Markus Stadlmann, chief investment officer at Lloyds Private Banking, said it appears UK investors are bracing themselves for stormier conditions ahead.

“Although the scores make for gloomy reading, we think the drop in sentiment towards UK assets reflects the perception of expected investment risk. While the UK economy is fundamentally strong, and there is currently nothing to be overly concerned about, investors are uncertain about the prospects of investing in UK shares, bonds and property for the medium and long-term.

“We are keeping a close eye on events across the Atlantic. In our view, there are enough signs emerging to suggest that US growth expectations will be overshot. Furthermore, while we generally think bond markets are overvalued, we believe that the best relative value can be found in US treasuries.”

Stadlmann added that it was only three months ago when the index showed record sentiment highs, but “investors should stay calm”.