Tue, 13/02/2018 - 10:43
UK investors continue to feel good about global investment opportunities, returning an improved overall sentiment score of 10.9 per cent for February, according to the latest investor sentiment index (ISI) from Lloyds Private Bank.
While the score is likely to have moved since the start of the month in light of the fast-paced correction on global stock markets last week, it represents an increase of 1.9 per cent compared to January, and 4.8 per cent since this time last year. It also comes on the back of four consecutive month-on-month rises, with 2018’s two sentiment readings both outscoring anything seen in 2017.
US shares saw the biggest monthly jump in investor confidence out of all eleven asset classes surveyed. The rise of 7.8 per cent echoes a similar uplift recorded in January, and there were further improvements for UK shares (2.5 per cent), Eurozone shares (+.8 per cent) and Emerging Market shares (0.1 per cent). Conversely, there was a small dip in popularity for Japanese shares (0.3 per cent) which goes against the current favourable in-house view of Lloyds Private Bank. Japanese shares still offer good value for money and are holding up well in the eye of the storm.
Unfortunately February was a poor month for both UK government bonds and UK corporate bonds, as last month’s improvements were wiped out, leaving them as February’s biggest losers. Popularity in UK government bonds – also known as Gilts - fell by 1.8 per cent and put sentiment back in negative territory at -1.4 per cent. Similarly, corporate bonds dipped 1.7 per cent to finish February at -2.4 per cent.
On the flip side, UK property continued to re-establish itself as one of the more favoured asset classes. You have to go back to June 2017 to find a sentiment score that was higher than this month’s score of 18.5 per cent which is up 3.8 per cent compared to last month.
With regard to asset class performance, tracking over a 12 month time period shows global equities at the top, led by emerging market shares on 38.0 per cent, then US shares on 23.9 per cent, followed by Japanese shares on 19.1 per cent. Over the same time horizon and aside from cash, the three worst performing assets were all UK-based. The biggest improvement this month was seen in emerging market shares (8.3 per cent), while the biggest decline was jointly held by UK shares and UK government bonds (both returning -2.0 per cent).
Markus Stadlmann, Chief Investment Officer at Lloyds Private Bank, says: “Despite our sentiment tracker scores showing good results for global equities, we know that valuation metrics reveal a number of different scenarios developing in key economies. Sentiment may well have shifted since the fall of stock markets from grace this week, but it’s not something for investors to be overly concerned about. US equities – this month’s most improved asset class for popularity – have been showing as extremely expensive for some time. This is in contrast to China and Japan where equities continue to offer good value.
“We have been anticipating a correction in global equities markets for a while now, although the historic point plunge in the US took some investors by painful surprise. If there is a positive to take away from it, it would be that investors need not panic. Given the current condition of the global economy, we would expect this correction to last for a few weeks before being followed by a recovery.
“For several months now, we have seen that investors in the UK continue to feel good about their prospects, with good investment conditions out there for those who know where to look. That said, you only need to consider current price fluctuations on equity markets around the globe to see the need for proactive risk management.”
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