British investors expect Asian stock markets to outperform all other regions this year despite macro concerns. But it is the UK stock market that Brits will be putting the most cash into in 2014 – suggesting that despite a rise in market confidence, investors are not ready to stomach the inevitable volatility that investing in emerging Asia produces.
Investor confidence has grown across all regions according to the latest Schroders Global Investment Trends Report, with two-thirds of Brits professing they are feeling bullish about investment opportunities, compared to 41% last year. Almost all UK investors will be looking to increase or maintain their investment portfolio this year, splitting spare cash between the stock market and cash.
Only one in 10 consumers will be paying down debt this year – which could be criticised as short-sighted while interest rates are at record low levels.
Equities will continue to be the favoured asset class, with domestic stocks the favoured region, and developed markets in general favoured for their stability.
Five years on from the low of March 2009 in the depths of the credit crisis in the UK the FTSE 100 has rallied from 3,512 to a 14 year high of 6,865 on Monday.
Investors in the UK market are being urged to reinvest dividends to boost total returns. Although on a share price level the FTSE 100 is 65 points off its all-time high, according to Hargreaves Lansdown if dividends had been reinvested the FTSE would have returned to its 1999 peak by February 2006.
It is not just UK investors who are returning to pre-recession sentiment. According to the survey, eight out of 10 investors surveyed from more than 20 countries across the globe said they would be adding to their investments this year. In particular those in developed regions were confident about stock market outcomes.
UK confidence is in part due to the increasingly positive economic outlook. Unemployment is low and the Bank of England governor Mark Carney has confirmed interest rates will remain low for some time – alleviating pressure on borrowers.
This morning UK GDP predictions for the first quarter were confirmed for 0.7%.
Jeremy Cook, chief economist at the currency exchange company, World First said that commonly, people will look to see employment as an indicator of business confidence, but more often than not, it is investment.
“Employees are brought in when demand is high, and investment is made when profits are good and confidence in future expansion is strong. We are finally starting to see the latter it seems,” he said.
Investors keen on the domestic market should consider highly-rated UK equity income funds and opt to accumulate dividends.
Artemis Income is Morningstar analyst Gold Rated, run by widely respected fund manager Adrian Frost for the past 12 years. Threadneedle UK Equity Income is Silver Rated and managed since February 2006 by Leigh Harrison.
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