Confidence among active investors is at its highest in three and a half years, research from the Association of Investment Companies suggests.
Confidence is also returning amongst the traditionally more cautious general public, who are at their most positive on the stock market since AIC records began in 2004.
The general public’s confidence in the UK housing market has also improved dramatically over the last year, although still has some way to go before it reaches the highs of a few years ago.
Some 52 per cent of active investors plan to increase their stock market exposure over the next few months, a big leap from 33 per cent in September 2008 and September 2007. Confidence has not been as high since February 2006 (54 per cent). Some 62 per cent of active investors expect equities to outperform property over the next year, the highest since February 2005 (71 per cent).
Risk appetite is also increasing amongst active investors, with 17 per cent of active investors finding smaller companies the most attractive sector, over double the amount in February this year (eight per cent). The average UK smaller companies investment company is up 52 per cent over the last six months to 30 September 2009, compared to a 29 per cent rise in the average investment company.
Of those active investors decreasing their stock market exposure (nine per cent), over a quarter of these (27 per cent) say they are taking profits.
The general public also seem to be warming up to the prospects for both the stock market and the UK housing market. Some 19 per cent of the general public think equities will outperform the housing market over the next year, and this is the most positive the general public have been since AIC records began. Some 14 per cent believe both will make good returns, compared to just three per cent back in February.
Confidence in the UK housing market is also increasing amongst the general public, with 22 per cent expecting the housing market to outperform the stock market compared to an all time low of five per cent last year. This is the most confident the general public have been about the housing market since October 2007 (27 per cent), but is still some way off the dizzy highs of a few years ago. Indeed in March 2005, some 46 per cent of the general public expected the UK housing market to outperform the stock market over the year.
Blue chip stocks remain a firm favourite with active investors, with 20 per cent finding blue chips the most attractive sector at the moment, although whilst still the most commonly favoured sector, it is down from 25 per cent in February this year. The second most favoured sectors were smaller companies and resources and commodities, each on 17 per cent, followed by financials (11 per cent). Commercial property has seen a slight pick-up in sentiment, with five per cent of active investors finding this the most attractive sector at the moment compared to two per cent in February 2009 and one per cent in October 2008.
Active investors continue to favour the UK, with 67 per cent of active investors saying they are mostly investing in the UK at the moment. Emerging markets were the second most favoured investment region (11 per cent), up from six per cent in February 2009 and perhaps again reflecting increased risk appetite amongst active investors. This was followed by Asia Pacific (eight per cent), Europe (seven per cent) and North America (four per cent).
Annabel Brodie-Smith, communications director at the AIC, says: “Clearly the recent market rally has helped investors put the market turbulence of the last 12 months behind them. It’s encouraging to see investor confidence surge amongst both active investors and the general public. Certainly those investors who had the courage to invest earlier in the year will have been well rewarded. Risk appetite is also on the up, as tends to be the case during a market rally, and it will be interesting to see if this continues.
“Investors who are interested in getting access to the stock market should consider an investment company. Investment companies have a strong long-term performance record, generally have low charges and they allow investors to spread their investment risk. There is a wide range of companies available to suit different risk profiles and each company has an independent board to look after shareholders’ interests.”
