Investor confidence plummets in July after "limp government" emerges from General Election

 
William Turvill
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Ministers Attend David Cameron's Last Cabinet Meeting
Theresa May's Conservatives failed to win a majority in last month's General Election (Source: Getty)

Investor confidence has taken a dive this month after a “limp government” emerged from June’s General Election, according to two separate studies.

The Hargreaves Lansdown Investor Confidence Index fell “pretty close to the bottom of the barrel” as “investor sentiment adjusted to the new political situation in the UK and the commencement of Brexit negotiations”.

The Hargreaves Lansdown index fell 20 per cent, from 86 points to 69 points. This is well below the average level of 99 and close to the lowest-ever reading of 59 in November last year.

The survey of investors also found that the proportion expecting an interest rate rise in the next year shot up, from 54 per cent in June to 81 per cent in July.

Senior Hargreaves Lansdown analyst Laith Khalaf said: “Investor confidence is scraping along pretty close to the bottom of the barrel right now, in stark contrast to the stock market, which is riding high.

“The UK currently finds itself in economic limbo, with the election of a limp government and the start of the long and winding Brexit journey both creating a sense of suspense, which appears to have taken its toll on investor sentiment.

“There is a silver lining to the cloud currently casting a shadow over investor confidence, because it suggests markets are not being driven by reckless abandon, and that there is scope for improving sentiment to have a positive effect on stock prices.”

Meanwhile, Lloyds Bank’s investor sentiment study for July placed confidence at its lowest level this year. Confidence in UK assets took the biggest hit.

On the Lloyds index, sentiment dropped from 6.29 per cent to 2.59 per cent. However, this is up from -4.75 per cent in July last year after the UK voted for Brexit.

Markus Stadlmann, chief investment officer at Lloyds Private Banking, said: “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.”

Read more: Consumer confidence has fallen for the third quarter running

Net Sentiment July 2017 Change from June Change from July 2016
UK shares 2.75% -10.75% 18.04%
Eurozone shares -12.56% -0.63% 35.71%
US shares 0.86% 0.08% -2.53%
Japanese shares 7.49% 0.59% 8.59%
Emerging market shares 15.89% -3.10% 8.60%
UK government bonds -9.77% -8.72% 6.19%
UK corporate bonds -4.07% -3.90% 9.76%
UK property 14.21% -6.97% 19.97%
Gold 36.34% -4.03% -17.24%
Commodities 12.05% 0.59% 6.50%
Cash -34.71% -3.88% -12.81%
Average 2.59% -3.70% 7.34%

Read more: The City loses confidence despite enjoying strong second quarter