20th July 2015
July witnessed the largest annual fall in sentiment towards eurozone shares since March 2013, according to new research from Lloyds Bank.
The group’s Private Banking Investor Sentiment Index showed that net investor attitudes towards the asset class declined 19 percentage points from last month and 30 percentage points from this time last year to -48%.
UK shares saw the second biggest decline in sentiment to 26%, reversing the 14 percentage point rise seen last month, bringing it back to pre-election levels in May. For their part emerging market shares saw the third largest decrease, falling 10 percentage points, to 10%.
The analysis found that gold and UK government bonds were the only asset classes to record an increase in July, rising six percentage points and two percentage points from last month to 36% and 19% respectively.
Despite an eight percentage point decline, net sentiment remains strongest for UK property at 47%, whilst gold remains robust at 36%. Eurozone shares, at -48%, and Japanese shares, with -1%, are the only two asset classes to currently sit in negative sentiment as the large drop in the value of Chinese equities in the past month has likely taken its toll on sentiment for Japanese shares and Emerging markets.
In line with asset class sentiment, actual market returns show nine out of 10 classes reporting a decrease in the past month. In terms of returns earned, there was a decrease during the past month for all but UK Government bonds, improving 0.4%. Eurozone, UK shares and emerging market stocks all saw the largest decrease in returns of -5%, reflecting investor sentiment towards the asset classes.
Ashish Misra, head of portfolio specialists at Lloyds Bank Private Banking, said: “We are witnessing a classic response from investors during this dramatic time in the Eurozone. While riskier assets, such as eurozone shares go down due to the economic uncertainty, ‘safe haven’ assets such as Gold and UK government bonds increase due to their flight-to-safety behaviour typical of investors in such market conditions.
“The significant jump we saw last month for UK shares also shows that the euphoria post-general election is moderating and correcting back to pre-election levels. Overall, despite the results making for some bleak reading, we may see, at best, a visible pop-up in performance next month for Eurozone shares, or at worse, a flat lining of results.”