Investor confidence in US stocks has dipped, as nervousness over the upcoming presidential election sends jitters through the markets.
The latest Investor Sentiment Index compiled by Lloyds Bank revealed British confidence in US equities had slipped to 4.3 per cent this month, from 7.7 per cent in September, which is the biggest drop of all the asset classes over this period.
Given the uncertainty around the outcome of the upcoming presidential election, the chief investment officer at Lloyds Private Banking, Markus Stadlmann, said it was “unsurprising” investors are increasingly nervous about US equities.
But he also pointed out that weaker-than-expected employment data and ongoing interest rate speculation has dented sentiment.
Recent analysis from exchange-traded fund provider Source revealed markets were only slightly hindered by US elections in the past, and rallied in the months after the vote.
The Lloyds index also revealed confidence in Eurozone equities had dropped by nearly 3 per cent, hitting -40 per cent, an indication sentiment is nearing a level where investors are desperately pessimistic towards the asset class.
This fall coincided with the UK firming up the schedule for leaving the European Union.
Data also revealed sentiment in UK government and corporate bonds had started to decline for the first time since July but investor confidence in UK equities and UK property increased for the third consecutive month.
“We expect investors to remain cautious about the UK and we are seeing investor uncertainty seep in around fixed income,” Mr Stadlmann said, adding bonds are currently looking overvalued and causing gilt yields to rise.
Elsewhere, commodities saw the biggest increase in investor confidence, fuelled by positive market data and less gloomy forecasts for the asset class.
Lloyds also revealed gold had maintained its top position as the asset class of choice, as investors turned to the ‘safe haven’ sector in a bid to ward off the uncertainty and volatility which continues to grip the markets.
Scott Gallacher, director at Leicester-based Rowley Turton, said: “Regardless of any recent concerns such as the presidential election, I think the US is too big a market for investors to ignore.
“Generally I am positive on the outlook for the US as a whole,” he said, pointing out most of the innovations in the last couple of decades have come from the US, such as Facebook, Twitter, and Google.
“That said, if investors are concerned then they should use global equity funds to access the US, as this gives the fund manager the flexibility to change the geographical positioning as and when they feel appropriate.”
katherine.denham@ft.com
