UK Investors Warming To Developed Market Equities - CFA

Robbie Lawther

1 June 2018

UK investor confidence in developed market equities is slowly returning, after a high level of perceived overvaluation last quarter, according to a recent survey.

CFA UK’s Valuations Index measures 11,600 UK investment professionals’ perceptions of the value of equities, bonds and gold in Q1 2018.

Whilst the majority of investors polled still struggle to find value in this asset class, around eight per cent fewer respondents now consider developed market equities to be overvalued, dropping from 73 per cent last quarter to 65 per cent.

This is in spite of a three per cent rise in the value of developed market equities since Q4 2017.

Some 73 per cent of UK investors currently believe emerging market equities to be undervalued or fairly valued, increasing from 69 per cent in Q4 2017.

Having steadily declined since Q2 2017, the proportion of investors identifying government bond overvaluation has once again risen, reaching 80 per cent this quarter.

As in Q4 2017, gold is the asset class in which investors have most confidence, with almost half of those polled considering it to offer fair value and an additional 24 per cent considering it to be undervalued.

“Global financial markets are currently experiencing a period of instability, as factors like the imposition of tariffs by the US, potential interest rate rises and geopolitical uncertainties all disrupt the normal state of play,” said Will Goodhart, chief executive of CFA UK. “The results of our index show that investors are feeling these pressures and looking for new investment strategies. The vast majority of our respondents consider bonds and developed market equities to be overvalued and, out of the core five asset classes included in our survey, now see gold as a more attractive option. Commonly seen as a safe haven during uncertain times, gold may become increasingly popular in the face of continued uncertainty about valuations and global stability.”