Investment sentiment drops in April despite market recovery


Investment sentiment is lagging the market, with investor sentiment falling -0.16 per cent for the period between March and April, despite most asset classes seeing positive performance over the same period.

The Lloyds Bank Investment Sentiment Index found net sentiment across asset classes was 2.1 per cent in April compared to 2.3 per cent in March, and 16.6 per cent at the same time last year.

Net sentiment measures the difference between those who hold a positive view and those who hold a negative view across a range of investments for the next six months.

Sentiment was highest for UK property and gold, which sat at 40.9 per cent and 34.7 per cent respectively. However, attitudes to both these asset classes dropped in the period since March by -0.2 per cent and -4.1 per cent respectively.

UK and US shares were the only other asset classes that experienced positive sentiment, albeit only 2.2 per cent and 1.7 per cent respectively.

Eurozone shares had the most negative sentiment at -36.3 per cent, however, this was up from -39.9 per cent in March.

UK government and corporate bonds were the two biggest fallers when it came to investor sentiment, dropping 5.9 and 4.9 per cent respectively, believed to be driven by “geo-political issues and the status of the UK’s current account deficit”.

Japanese equities, on the other hand, saw the greatest positive change in attitude, rising to 7.9 per cent, although sentiment for the asset class was still negative at -11.5 per cent.

Despite the negativity, UK government bonds were the only asset assessed in the index to see month-on-month declines in market performance at -0.7 per cent. Eurozone shares, on the other hand, were up 8 per cent between March and April.

Investor confidence may have been impacted by the ECB cutting its main interest rate to zero from 0.05 per cent, a note accompanying the index said. The UK budget also indicated the rate of UK economic growth is slowing, with forecasts for GDP growth for the year revised to 2 per cent where it was previously 2.4 per cent.

Markus Stadlmann, chief investment officer at Lloyds Bank Private Banking, says: “We can see that investor sentiment does not simply follow market performance, but is influenced by a combination of market movements, economic news and behavioral biases.

“The perception of economic data is currently so depressed, meaning that small improvements or surprise changes in economic statistics, which are always closely followed, can have a huge positive impact, potentially disproportionately.”