A new worldwide measure shows that the UK is the only sector in which investors’ confidence dropped this month.

Confidence in UK Economic Growth has also decreased by 5% while it has marginally increased in Europe (+1%) with bigger boosts in confidence in other sectors – Asia Pacific (+11%), Japanese (+10%), Global Emerging (+7%) and North American (+8%) sectors.

The measure comes from business consultancy Hargreaves Lansdown and its head of platform investments, Emma Wall, says UK investors have started the year shunning domestic equities and casting doubt on the economy’s ability to grow. 

“Surveyed before last week’s inflation and GDP growth figures were released, HL clients are sceptical about economic growth, with confidence in the outlook falling 5% on December’s Investor Confidence survey. Investors revealed similar negativity when it comes to the UK stock market – the only sector in which investors’ confidence dropped this month, and by more than 10%. 

“Perhaps weighing on investors’ minds was the sizable 30-year gilt issuance from the UK that week, with yields at multi-decade highs. But despite offering an attractive real rate of return, the market offered little demand, such is the expectation that bond yields will rise further in the near term. Both stock and bond market volatility followed, and significant political discussion too – with the rumour mill swirling that the increased cost to service this new debt would have to mean another tax hike or spending cut from the Chancellor in the Spring Statement.

“Further afield, Asia, Japan, global emerging markets and North America saw far more healthy uplift in investor confidence, with increases month on month ranging between 7 and 11%, despite mixed stock market performance. 

“Helping confidence in the US is the new US President Donald Trump, who, despite being a highly divisive political figure, has been universally welcomed by equity markets as ‘A Good Thing’. Lower taxes will provide a boost to consumers and corporates, but a word of warning, expect volatility to increase alongside some valuations.

“In fact, we think now is a good time to trim positions and take gains from the US – both the NASDAQ and the S&P 500 have made 30% gains of the last 12 months after all. HL trading suggests that clients are not taking this action however, piling in to the very investments that are most expensive – with the top 10 most bought funds dominated by large US companies, and mostly tech. 

“We are more bullish on US smaller companies, and global funds also feature, but those offer scant diversification in the list. Investors should check their existing exposures before diving into the momentum trade.”