Investor confidence could have fallen to its lowest point since the financial crisis was brewing in March 2008, according to an index of UK investors.
The Hargreaves Lansdown Investor Confidence Index fell 13% to a record low of 59 points in November, the lowest level recorded since the index began in 1995.
The index’s previous record low, 61 points, was recorded in March 2008, as the financial crisis gathered pace.
Laith Khalaf, senior analyst at Hargreaves, a financial advice firm, said three of the index’s worst ten months ever were in 2016 – although he noted that despite this lack of confidence, the FTSE All Share returned 13% in the first ten months of this year, and in October reached a record high.
The firm said the “peacock effect” is at play – where central bank policies have distorted asset prices ahead of earnings, creating a market that is “all puff and no substance”. Despite this, valuations are still close to their historical average and are way below the heights of 1999, the FTSE’s highest year.
“So far in 2016 investors have been buffeted by a commodity collapse, the Brexit vote, and most recently the US election, so it is little wonder they are feeling cagey right now,” Khalaf said.
“The conundrum however is that the stock market and confidence seem to be moving in opposite directions. There is some sense in this because as stock price rise, investors become more wary of a subsequent fall.”
The firm suggests the present milieu could represent a buying opportunity, as the stock market is increasingly stabilising as investor worries increase – and anxious markets are preferable to “irrationally exuberant” ones.
Hargreaves Lansdown conducted the survey prior to November 7, meaning its findings do not reflect investor sentiment in the wake of the US presidential election.
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