14th September 2015
Following the recent market turmoil investor confidence has plummeted to its lowest level in more than two years, new research has shown.
According to the Lloyds Bank Private Banking Investor Sentiment Index, September has seen the largest fall in overall monthly investor morale since May 2013.
While net investor sentiment declined nine percentage points (-9pp) from last month, overall investor sentiment for this month is also nine percentage points lower than this time last year.
Concerns about the slowing of China’s economy and the impact of currency devaluation have driven huge month-on-month declines in confidence towards emerging market equities, down 20pp, UK equities off 18pp and commodities, with a 15pp fall.
Sentiment towards Japanese equities dropped 14pp. While confidence towards UK equities fell by a record monthly amount, net sentiment towards this asset class is still positive at 19%, making it the second-most appealing asset for investors behind UK property, which stands at 48%.
Bucking the trend this month is sentiment towards the eurozone equities asset class, which has seen a positive increase of 7pp. This may be driven in part by the European Central Bank’s continued quantitative easing programme and a weaker euro. This is the second consecutive monthly improvement for the asset class, however it is still the least-favoured option for investors with a net sentiment score of -36pp overall.
In addition to uncertainty created by China, there is much discussion in the investor community about whether the US Federal Reserve will raise US interest rates in September – the first upward move in interest rates since July 2006. The polarised views on this topic may be contributing to further financial market volatility, which in turn may be contributing to the improved sentiment of gold. Sentiment towards gold improved by 6pp this month, after falling by over 24pp between July and August.
Ashish Misra, head of portfolio specialists at Lloyds Bank Private Banking, said: “Although it is still marginally positive, investor sentiment has this month taken a massive step backwards driven by concerns about the unfolding trajectory of economic activity in China. As the world’s second-biggest economy and its understandable powerhouse status on the world stage, China’s troubles will inevitably impact the global economy.
“In a reversal of last month, sentiment towards gold has jumped in September. In times of volatility, people look to the perceived safe-haven qualities of gold and this has once again been the case in recent weeks, which we may expect to continue in the short-term as uncertainty and investor anxiety holds to present elevated levels.”