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Investor confidence picks up in 2018

The Hargreaves Lansdown Investor Confidence Index rose by 16 points in January, posting a reading of 83 points, up from 67 in December.

Confidence still remains below its long run average of 102.

In regional confidence surveys, sentiment towards the Asia Pacific region is running high, with a confidence score of 74.8%, the highest level recorded since February 2013. Likewise there is also positive sentiment towards shares in Global Emerging Markets, with a confidence score of 72.5% (a score above 50% represents positive sentiment).

Japan has also piqued investors’ interest, with a confidence score of 68%, the highest reading for this market since the regional survey began in 2011.

Despite concerns over high valuations, confidence in US shares remains strong at 65.3%. European markets carved out a confidence score of 64.3%. Confidence in the UK rose from last month, but it’s still bringing up the rear with a confidence score of 59%.

On interest rates, 86% of investors think we will get a hike from the Bank of England this year.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown:

‘Investors are looking both east and west for opportunities, anywhere but here it would seem, as the UK is the least favoured global stock market.

This echoes the trend we have seen in industry fund sales statistics, which show retail investors are swerving the UK at the moment, almost certainly a result of perceived political uncertainty and the overhang of Brexit.

The good news is investors have started the new year in brighter mood than they finished the last, with confidence picking up from a very poor reading in December.

The Asia Pacific region is burning particularly brightly in terms of sentiment right now, as are Global Emerging Markets more generally. These markets offer investors access to companies operating in some of the most dynamic and expansionary economies in the world. Risk is heightened in the stock markets of less developed countries, but long term investors can afford to ride out the ups and downs in search of superior growth prospects, if they have the stomach for it.

There has also been a resurgence in sentiment towards Japan, where shares recently hit a 26 year high. Despite its recent strong run we believe Japan is still the most attractively valued developed market, though it’s fair to point out the land of the rising sun has seen many false dawns in its stock market. An ageing population remains a headwind for Japan, but the government has shown it’s willing to throw the kitchen sink at the economy to get it moving.

Concerns over valuations in US stocks have not dented investor confidence in the region, which has picked up in January after fading throughout 2017. No doubt the new Trump tax cuts have invigorated hopes of more money filtering through to companies and workers, providing greater stimulus to the US economy.

Investors are pretty sure there’s going to be an interest rate rise this year, as do markets which are pricing in a four in five chance of a hike in 2018. This makes the recent glut of money heading for bond funds across the industry rather puzzling, seeing as rising rates suggest it’s going to be an uphill battle for fixed interest returns from here on in.’