UK investor sentiment rebounds in August but falters for US equities

Investor sentiment rebounds from last month by 2.33 per cent, but still isn’t at pre-election highs

Investor sentiment rebounded in August, from 2.59 per cent to 4.92 per cent, although failed to reach the highs seen before the UK general election. Despite not reaching levels seen early this year, August’s UK investor sentiment figure is still considerably higher than the 1.53 per cent seen 12 months ago. 

UK government bonds saw the biggest rise this month, increasing from -9.77 per cent to -2.28 per cent showing investors are becoming increasingly optimistic towards gilts and the outlook for the UK. US equities did not fare as well, seeing the biggest reduction in August from 0.85 per cent to -2.54 per cent. This comes at a time when President Trump’s administration is experiencing continued turmoil. US equities also saw the second biggest reduction in sentiment year on year, down 13.06 per cent.

Gold continues to outshine the other asset classes, attracting the highest sentiment, which is over the extreme threshold at 40.94 per cent. 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 per centin August, a 5.1 per cent increase on the previous month and 5.13 per cent on this time last year. Despite a debate about whether a market correction could be on the horizon, UK property also received investor attention with sentiment at 13.33 per cent.

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

There is a more positive picture when it comes to actual asset class performance compared with the previous month as all asset classes are in positive territory. The biggest improvers are commodities (up 4.6 per cent), Eurozone equities (up 3.9 per cent) and emerging market equities (up 3.3 per cent).

Markus Stadlmann, Chief Investment Officer at Lloyds Private Banking, says“UK government bonds saw the biggest improvement this month, moving from -9.77 per cent to -2.28 per cent, 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 per cent to -2.54 per cent.

“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.

“The second ‘eye catcher’ for us concerns emerging market equities. UK investors are taking more of a shine to them, and so are we. Having generally minimised our exposure to emerging markets for a number of years, we have been increasing our allocation to EM equities (and bonds) during the last fifteen months. We feel that long-term valuations are showing as fair, while investment risks are significantly below historic levels.

“Generally speaking, the rebound in overall sentiment since last month was rather underwhelming although not unexpected. Much like the weather at this time of year!”

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