The age of ‘gentle optimism’

This is not the exuberant optimism that followed the 2009 stockmarket falls, which simply reflected the sweeping relief that financial markets had not quite disintegrated, nor had City traders flung themselves from their office windows in droves.

This gentle optimism is much more welcome and potentially more sustainable than the emotion-led highs and lows of the previous few years.

The latest Celsius report, a quarterly investment sentiment indicator produced by Financial Times Publishing, reveals that advisers have increased risk appetite for equities; increased confidence in growth asset classes and IMA sectors; and increased appetite for a larger number of IMA sectors since last quarter.

On a product level, there has been a lacklustre welcome to the RDR. Product types vaunted as RDR beneficiaries – investment trusts, index trackers and exchange traded funds – received a rise in adviser favour, but of a mere 1-2 points in the first quarter of 2013. The product to buck this was structured products, which stormed up the Celsius index by 20 points.

However, structured products remain advisers’ penultimate choice of product at 29 on the index, just above venture capital trusts and enterprise investment schemes, which had the largest sentiment contraction (of -16 points).

Confidence has, however, soared in the multi-manager sector, with these products achieving the highest confidence rating it has recorded, of 41, up 26 points since the last quarter of 2012.

Europe excluding UK, as a region and within IMA sectors, has dominated adviser thoughts this quarter. The sentiment shift from advisers has gone from frosty to warming at the end of 2012, to smoking this quarter.

Policymakers are hardly out of the woods – these are politically dangerous times in continental Europe – but in market terms, there has been great progress. The eurozone no longer balances on a knife-edge of potential break-up. This year, the eurozone can expect continued but weak recession in the first six months, followed by a sluggish recovery. That this is the good news likely to be buoying European stockmarkets tells us a lot about the ‘new normal’ advisers are operating within.

Tempered growth in emerging markets such as China, Latin America and India combined with sluggish GDP growth in the US, Europe and the UK points to a lower level but potentially more sustainable growth trend. Again, this is the good news.

Anything that indicates a level of stability, a dampening of uncertainty and volatility, will be welcome news for longer-term investors.

Anna Lawlor is a freelance journalist