Surveys
Pre-Election Jitters Hit Sentiment Towards UK Asset Classes - Survey

A poll of investors conducted a day before a UK general election widely - and wrongly - predicted to lead to an indecisive result helped hit sentiment to UK asset classes.
Fears about the outcome of the UK general election of 7 May
helped drive down sentiment in UK assets by the biggest extent
since November 2014, according to a monthly barometer of opinions
from Lloyds Bank Private Banking compiled a day before polls
opened.
Eight out of 10 asset classes saw a drop in investor sentiment,
with UK equities taking the largest hit, falling by 11 percentage
points from April to a net sentiment reading of 26 per cent in
May.
For the purpose of the Lloyds Bank Private Banking Survey, net
sentiment is a figure showing the difference between persons
holding a positive and negative view for an investment over
the next six months. All figures, unless otherwise stated, are
from YouGov. A total sample of 4,478 adults were involved in the
survey, of which 1,740 adults were investors. Fieldwork was
undertaken from 5 to 6 May – a day before the UK election.
The data might even suggest that the old adage of “Sell in May,
come back on St Ledger’s Day” – was a factor in investor
behaviour. The pattern of selling stocks in late spring and
returning in the autumn has been often commented upon, although
the exact economic drivers aren’t always clear, and the pattern
is not necessarily repeated each year.
UK government bonds saw the second biggest decline in sentiment
among UK asset classes to 12 per cent, a monthly decrease of 4
percentage points. Sentiment towards some international shares,
on the other hand, improved, with eurozone shares and Japanese
shares reporting increases. Eurozone shares recorded the
largest rise for the third consecutive month, of over 5
percentage points, but the net balance still remains in negative
territory (-23 per cent), the survey showed.
Despite large declines, net sentiment remained strongest for
UK property, at 47 per cent, whilst UK shares also
remained strong at 26 per cent.
In contrast to waning sentiment for eight asset classes, market
performance, in terms of returns earned, increased for four of
the ten asset classes in the past month. Commodities saw the
largest monthly increase in returns of 8 per cent, possibly
helped by a recent oil price recovery. This was followed by
Japanese shares and emerging market shares both sitting at 1 per
cent.
“The results paint an interesting picture as a snapshot for UK
asset classes. Having recorded their worst performance since
November 2014 across all asset classes, the results show investor
unease due to potential economic and post-election uncertainty in
the UK in May,” Ashish Misra, of Lloyds Bank Private Banking,
said.
“However, eurozone shares and Japanese shares have displayed
positive performances and have gained from the halo effect
arising around the outcome of elections in the UK. With continued
significant improvement in net sentiment scores for eurozone
shares, the asset class could be the one to watch out for with a
potential to extend and sustain the current upward trend in the
coming months, unless it hits an unexpected stumbling block,”
Misra said.
In terms of an annual change of actual performance, six of the
asset classes recorded an increase in returns earned, with
Japanese shares (34 per cent), UK property (15 per cent) and US
shares (11 per cent) leading the way with the largest growth
rates.
However, on that timescale investors did not fare so well with
commodities, where returns fell by 33 per cent, followed by gold
(-9 per cent) and eurozone shares (-7 per cent).