Investor confidence rebounds from post Brexit concerns

12th August 2016

Investor confidence has rebounded sharply in August with the Hargreaves Lansdown Investor Confidence Index rising 19% since July’s reading, which was taken in the immediate aftermath of the EU referendum.

The August reading of 80 is however still below the pre-Brexit level of 92, and lower than the long term average of 101.

Outside of the UK, investor confidence in European shares also showed improvement, though sentiment is still modestly negative. The US remains the market which investors have most confidence in, followed by global emerging markets.

Laith Khalaf, senior analyst, Hargreaves Lansdown says: ‘Investors are now more positive about the prospects for the stockmarket than they were in the immediate aftermath of the referendum, though there is still a Brexit-shaped dent in confidence.

The sharp fall and subsequent recovery in confidence underlines how volatile sentiment has been in the last few months, and why it’s a particularly inappropriate time to be hanging too much significance on one or two data points.

Khalaf says this applies equally to consumer and business surveys too, and while it’s comforting to fill the Brexit information vacuum with whatever comes to hand, ultimately we’re just going to have to wait and see what the actual impact of the vote will be.

The UK stock market is still trading near its long term historical average, and looks attractive when compared to government bonds, some of which have traded at negative yields in recent days, offering investors the dubious privilege of actually paying for the privilege of lending money to the UK government.

Investors remain most confident in the US stock market despite relatively high valuations, which is understandable seeing as economic growth and monetary policy appear to be going in different directions on either side of the Atlantic.’

Regional confidence scores

A score above 50% represents positive sentiment.

Jul-15 Aug-15 Change
UK shares 52.3% 59.8% 7.5%
European shares 43.3% 47.3% 4.0%
Asia Pacific shares 58.8% 59.3% 0.5%
Global Emerging Markets shares 57.0% 60.3% 3.3%
Japanese shares 54.5% 54.3% -0.3%
US shares 62.0% 62.8% 0.8%


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