UK investors showed a “renewed confidence” in British-based assets in February but the continued popularity of gold points to lingering fears over political tensions, according to Lloyds Private Bank.
The British bank’s investor sentiment index climbed to 6.1% in February, its highest level since April 2016, as UK investors “continued to ride the positive wave of sentiment” from the beginning of the year.
The good vibrations from British investors comes despite the fact that asset performance was “more muted” this month, with an average uplift of just 2.4%, the bank noted.
This was especially noticeable in the case of UK property, which experienced a rebound in investor sentiment, despite the fact that it saw the biggest decrease in asset performance (-4.4%). Still, UK property rose to 31.3% on Lloyd’s investor sentiment index, in another sign that markets have begun to move past the volatility from the Brexit vote.
Investors’ enthusiasm toward UK shares also ran high during the month (15.5%), though was not as strong as the demand for the asset class in January (21.5%).
However, of all the assets highlighted in the study, gold proved the most popular among UK investors, rising 5.59% between January and February to a 46.37% approval rating.
The continued gold boon is further evidence that “investor optimism is tempered somewhat by the need to shield against persistent geopolitical uncertainty,” explained Lloyds Private Bank CIO Markus Stadlmann.
“It is worth remembering however that a sentiment in excess of 40% has historically been shown to be overly optimistic, which can create investor disappointment,” he added.
Eurozone shares registered the lowest sentiment on Lloyd’s index at -34.1%, reinforcing UK investors’ guardedness over uncertain political scenarios.
While investors remained cautious, Stadlmann said Lloyds has more confidence in the prospects of European companies over their American counterparts.
“Despite eurozone shares returning the lowest sentiment score once again, we remain more optimistic than some of our peers about the health of European corporates and the Eurozone economy as a whole. Conversely, we share investor caution towards US shares, having observed early indications that US corporate profits may have peaked, and in some cases are now in decline.”
Stadlmann also found investors’ increased confidence in commodities somewhat misguided, stating “we have yet to see enough of a fundamental recovery in supply and demand to consider reintroducing it to our client portfolio benchmarks.” Over a 12-month period, the asset class has seen an uplift in sentiment of 23.8%.
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