Investors on the Hargreaves Lansdown platform were significantly less confident about their immediate prospects in July than June, with uncertainty around Brexit being the major cause, the investment firm has said.
The company's investor confidence report measures investor sentiment over the periods six months and one and three years.
In its July survey, the company reported its clients confidence level as being at 68, down from 78 in June, and 80 in May. The long-term average for this survey is 101.
The company said: "Brexit remains the biggest worry for investors, but global instability and the UK’s besieged retail sector also rank highly.
"Confidence in the UK economy lags even further behind confidence in the stock market, with the company’s UK Economic Confidence Index (a newer measure) falling from 61 to 52 in July."
The company added that while sentiment towards all geographic regions fell back recently, with investors turning most heavily on Europe, the index has fallen from 96 to 58 since May.
European equities were strong performers in the 2017 calendar year, returning 26 per cent, compared with 23 per cent for the MSCI World Index.
But 2018 has been a different story, returning a net loss of 2.7 per cent, compared with a positive return of 0.26 per cent for the average fund in the MSCI World Index in the same time period.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "Investors have got the summertime blues, as increased political uncertainty and problems in the retail sector have dampened spirits considerably.
"Confidence in both the UK stock market and the economy have consequently taken a hit, though a declining trend can be observed across all global markets, particularly Europe.
"Negative sentiment towards the UK is reflected in valuations within the UK stock market, despite the relatively healthy level of the Footsie overall, with UK domestic stocks firmly out of favour.
"Indeed this has persuaded many investors to steer clear of the UK, and there is now an entrenched preference for overseas investments evident in buying activity across the funds industry. That’s understandable, but also opens up opportunities for contrarian investors willing to ride out volatility in the short term."
Luca Paolini, chief strategist at Pictet Asset Management, said a combination of growing fears about the impact of a US trade war and about the sustainability of global growth have caused him to be cautious on equities.
He said: "In terms of geographic regions, we have cut eurozone equities to neutral and raised Japan to a full overweight position. US stocks remain expensive.
"Overall, with the global economy losing steam, we’ve trimmed our exposure to economically-sensitive stocks and added to sectors that are best placed to weather a downturn."
david.thorpe@ft.com
