Confidence in UK asset classes collapses to its lowest point since November 2014

18th May 2015


May has witnessed the steepest fall in confidence towards UK asset classes since November 2014 as pre-election tension took hold claims new research.

The analysis from the monthly Lloyds Bank Private Banking Investor Sentiment Index showed that eight out of 10 asset classes recording a drop in investor sentiment.

UK shares endured the biggest decline, falling 11 percentage points from last month to 26%.

UK government bonds saw the second biggest decline in sentiment towards UK asset classes to 12%, a monthly decrease of 4 percentage points.

Conversely international shares remained strong with Eurozone and Japanese markets reporting the only increases. Eurozone shares recorded the largest improvement for the third consecutive month of over 5 percentage points but the net balance still remains in negative territory, at -23%.

Despite large declines, net sentiment remains strongest for UK property at 47%, whilst UK shares also remains strong at 26%.

However, market returns show four asset classes performing well in the past month. In contrast to waning sentiment for eight asset classes, market performance, in terms of returns earned, increased for four of the ten asset classes. Commodities saw the largest monthly increase in returns of 8%, a significant shift for the asset class, which could have been helped by the recent rise of crude oil prices.

This was followed by Japanese shares and emerging market stocks both sitting at 1%. Lloyds asserted that their performance against a negative UK result could be on account of a halo effect on contiguous asset classes arising from the political and economic uncertainty of a general election in early May.

Annual Changes

Seven of the ten asset classes have seen a fall in net sentiment over the past year. The biggest declines have been for UK shares, down 17 percentage points and recording its largest annual fall since the start of the survey in March 2013, UK property, off by 13 percentage points. Eurozone shares slid 11%. US shares and Japanese shares both recorded the biggest improvement in net sentiment rising two percentage points apiece, followed by Gold, up 1%.

Commenting on the data, Ashish Misra at Lloyds Bank Private Banking, admitted that having recorded their worst performance since November 2014 across all asset classes, the results show investor unease due to potential economic and post- election uncertainty in the UK in May.

Misra said: “However, Eurozone shares and Japanese shares have displayed positive performances and have gained from the halo effect arising around the outcome of elections in the UK. With continued significant improvement in net sentiment scores for Eurozone shares, the asset class could be the one to watch out for with a potential to extend and sustain the current upward trend in the coming months, unless it hits an unexpected stumbling block.”

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