Although optimism was riding high ahead of the UK’s snap election, the surprise outcome of a hung parliament leading into Brexit negotiations has taken its toll on investors’ sentiment a month on.
Accordingly the Lloyds Bank Investor Sentiment index dropped 3.7 percentage points, from 6.29% in June to 2.59% in July.
However, the bank noted that investor confidence was still 7.34% higher relative to last year’s sentiment immediately following the EU referendum.
Given the degree of unresolved political drama in the UK, it should come as no surprise that of all the various types of assets were looked upon the least favourably during the month.
UK equities registered the biggest change in sentiment, declining by 10.75%.
Lloyds Private Banking CIO Mark Stadlmann weighed in: “After the highs come the lows, and it appears that investors are feeling less confident following the UK General Election.
“In May, we saw investor sentiment reaching levels not recorded since April 2016, but this month’s sharp decline – particularly towards UK assets – suggests that the election outcome and ensuing political dynamics have caused uncertainty in the markets.”
This flagging perception of UK assets was not helped by a “reversal of bond market trends,” he added.
The already unloved UK bonds were the second biggest faller, dropping from -1.05% to -9.77% month-on-month.
“In the UK and elsewhere, markets have been very sensitive to perceived changes in communication by monetary policy makers,” Stadlmann explained.
“Whilst we do not expect the end of asset purchases by central banks alone to cause an unmanageable fall in bond prices, investors are rightly concerned.”
Hargreaves Lansdown’s own Investor Confidence Index also fell sharply over July, dipping 20% from 86 points the month prior to 69 points.
