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Investor sentiment rebounds, but not for US equities

Cherry Reynard
Written By:
Cherry Reynard

August saw a marked shift in sentiment towards US equities from UK investors, as the turmoil in the White House took its toll.

In general, investor sentiment saw a rebound over the month, from 2.59% to 4.92%, according to the latest reading from the Lloyds Bank Investor Sentiment Index, although it is still not at the levels seen before the UK general election. However, it is still considerably higher than the 1.53% seen 12 months ago.

US equities bucked the trend, seeing the biggest reduction in August from 0.85% to -2.54%. They also saw the second biggest reduction in sentiment year-on-year, down 13.06%.

UK government bonds saw the biggest rise this month, increasing from -9.77% to -2.28% showing investors are becoming increasingly optimistic towards gilts in spite of 10-year gilt yields at just 1.07%.

Gold continues to outshine the other asset classes, suggesting investors remain nervous on the economic outlook. It attracted the highest sentiment, which is over the extreme threshold at 40.94%.

Investors are also bullish about emerging markets, which coincides with the news that the asset class has outpaced developed market growth. Positive sentiment towards emerging markets equities reached 21.05% in August, a 5.1% increase on the previous month and 5.13% on this time last year.

UK property also received investor attention with sentiment at 13.33%.

However, in the continued low interest rate environment investors remain unenthusiastic about cash, which attracts the poorest sentiment at -30.39%.

Within equities, the biggest improvements were seen in commodities (up 4.6%), Eurozone equities (up 3.9%) and emerging market equities (up 3.3%).

Markus Stadlmann, chief investment officer at Lloyds Private Banking, said: “UK government bonds saw the biggest improvement this month, moving from -9.77% to -2.28%, showing investors are becoming less pessimistic towards gilts and the outlook for the UK. US equities did not fare as well, seeing the biggest reduction in August from 0.85% to -2.54%.

“We may have seen the UK electorate opting out of Europe, but when it comes to equities at least, UK investors are seemingly tempted to opt in…Generally speaking, the rebound in overall sentiment since last month was rather underwhelming although not unexpected.”