InvestmentsSep 19 2018

Hargreaves finds investor confidence at lowest level

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Hargreaves finds investor confidence at lowest level

Confidence among Hargreaves Lansdown clients about the prospects for their investments is at the lowest level since 1995, when records began.

The company said investors are less confident now than they were in the month of the EU referendum result (June 2016) and the month Donald Trump was elected (November 2016).

About £10bn was pulled out of UK funds and put in international investments since the EU referendum was announced, the firm said.

The HL Investor Confidence Index measures the confidence of retail investors in the UK stock market.

The long-term confidence level of the Hargreaves Lansdown client is on average 92 out of 100, and the average over the past twelve months is 71. The score in September was 58.

The company said investors in Asia and the US were more confident than those in the UK, despite the ongoing trade disputes between the US and China.

The potential for the UK’s exit from the EU to hamper investment returns was the main reason for pessimism among Hargreaves Lansdown clients.

Laith Khalaf, senior analyst at the firm, said: "Investor confidence in the UK stock market now sits lower than in the midst of the financial crisis, or in the immediate aftermath of the EU referendum.

"Brexit continues to dent sentiment towards both the UK economy and the stock market, even though the latter is globally diversified in terms of its revenue streams.

"The UK lags far behind emerging markets in terms of its approval rating from investors, despite falling markets in the far east, escalating trade tensions between the US and China, and a currency crisis in both Turkey and Argentina."

Mr Khalaf said investors were most likely impacted by the proximity and ubiquity of Brexit when considering the domestic stock market.

He said: "The effect on industry fund flows has been striking, with retail investors pulling around £10bn out of UK funds since the EU referendum was announced, in favour of more international investments.

"2017 was a record breaking year for fund industry sales, which demonstrates there is appetite for investment amongst retail investors, simply not for UK funds right now."

James Sullivan, multi-asset fund manager at Miton Optimal, said: "An appreciation of a stock market tells us nothing about its value, but with earnings spluttering, the expansion of the US market valuation multiple has been unavoidable and subsequently stretched.

"Our investment process is underpinned by valuation screening and the subsequent potential for future reward that outweighs the risks we adopt. This has lead us to invest in Japan, Asia and the UK, whilst carrying zero exposure to the US stock market."

David Scott, an adviser at Andrews Gwynne in Leeds, said he has been reducing his exposure to equities as he fears another crisis in financial markets is looming.

david.thorpe@ft.com