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Investor confidence on UK fixed income assets turns negative

Paloma Kubiak
Written By:
Paloma Kubiak

Investor sentiment has fallen to another record low despite recovery in market performance of all but one of the asset classes, an index reveals.

Latest figures from the Lloyds Bank Investor Sentiment Index which compares the outlook for each type of investment over the next half year, show investor confidence dipped to a record low for the second month in a row.

This is despite recoveries in the market performance of equity asset classes, property and commodities.

The index revealed that sentiment on UK fixed income assets turned negative while confidence in Japanese equities saw the biggest improvement in April, up almost 8%.

This may be a delayed response following the Bank of Japan’s decision in early February to join other central banks in negative interest rate territory.

UK government bonds and UK corporate bonds were the two biggest fallers when it came to changes in monthly investor sentiment (-5.90% and -4.88% respectively).

Lloyds said investor confidence may have been impacted last month by the surprise European Central Bank (ECB) move to cut its main interest rate to 0% from 0.05% and with growth in the UK slowing, the forecast for domestic product growth for 2016 was revised down from 2.4% to 2%.

But despite the negative sentiment, there has been a rebound in the actual market performance of all but one of the asset classes, which suggests the views lag behind the markets.

Markus Stadlmann, chief investment officer at Lloyds Bank private banking, said: “While investors’ attitudes to UK equities improved notably this month, we have seen sentiment slip in other asset classes.

“This is led by attitudes towards domestic bonds going from positive to negative. Gold has certainly lost a little lustre, with a drop in positivity, and UK property has also been knocked down a little.

“We can see that investor sentiment does not simply follow market performance, but is influenced by a combination of market movements, economic news and behavioural biases. The perception of economic data is currently so depressed, meaning that small improvements or surprise changes in economic statistics, which are always closely followed, can have a huge positive impact, potentially disproportionately.”