The UK remained an unpopular place for investors to park their cash in September, as lingering uncertainty regarding the shape of the Brexit deal continued to spark anxiety about the region’s long-term prospects.
The UK equities sector was the biggest loser by far, falling 3.20 percentage points (pp) in investors’ estimation to 1.55% between August and September, its lowest ebb for 18 months. The change in net sentiment for the asset class year-on-year was -14.23pps.
Investors were also far less confident about UK government and corporate bonds, which registered net sentiment of -5.20% and -4.26% for September, 2.92pp and 2.27pp worse than the previous month, respectively.
“With autumn rapidly closing in, it appears that UK investors are bracing themselves for stormier conditions ahead,” noted Markus Stadlmann, chief investment officer at Lloyds Private Banking.
“Although the scores make for gloomy reading, we think the drop in sentiment towards UK assets reflects the perception of expected investment risk.
“While the UK economy is fundamentally strong, and there is currently nothing to be overly concerned about, investors are uncertain about the prospects of investing in UK shares, bonds and property for the medium and long term.”
European equity rebound
European equities, on the other hand, continued its comeback, reaching its highest sentiment reading in the history of the LPBIS.
Although the asset class was still in negative territory (-5.78%), it has seen a double digit sentiment jump of 31.40% over the last 12 months.
Unsurprisingly in this environment, gold saw the highest increase in investor sentiment, rising 2.67pp between August and September.
Over the month, cash recorded the biggest dive in sentiment (down 5.5pp), which Stadlmann notes is unsurprising given the current low interest rate environment.
“Our monthly index has followed something of an unsteady course so far this year,” said Stadlmann.
“It was only three months ago when we were seeing record sentiment highs, but the ride since then has been bumpy. Investors should stay calm.”