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UK Investors follow US Investors into the Stock Markets

1,499 views · Published 28 December 2016 · 5:37 · Indexed 24 October 2026

Channel: The 2% Brief · 2016 · People & Blogs

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UK Investors follow US Investors into the Stock Markets 

Today is Wednesday 28th December 2016 and we are commenting on UK investors still flocking to the Stock market as its favourite form of Investment despite the FTSE 100 Index standing at 7,068 only marginally below its 52 week high of 7129.

Reuters' monthly survey of 13 UK-based investors, carried out from Dec. 15 to 21, showed funds increased their equity holdings to 45.4%, up one percentage point from November, and reduced their cash positions to 7.5% from 9.6%.

The main motivation for this is based on U.S. President-elect Donald Trump's plans to cut taxes and boost spending which has already pushed Wall Street to record highs, with financials, energy, materials and infrastructure stocks all expected to benefit.

Mouhammed Choukeir, the chief investment officer at Kleinwort Hambros stated:

"Equities are attractive in absolute terms, with reasonable valuations and positive momentum……They also remain attractive compared to the other core asset classes. As such, we continue to be 'risk on'."

Peter Lowman, chief investment officer of Investment Quorum, said that whilst equities in many parts of the world were not cheap, they were still better value than bonds. 

He argues:
"Therefore, any worthy pullback could be greeted by a wall of money that could exit from bonds and cash that is currently sitting on the side lines." 

An interesting comparison to this is a report published by the Confederation of British Industry (CBI), which states that UK retail sales volumes rose at their fastest pace since September 2015 in the year to December. However, it expects retail sales growth to slow down next year, as a result of the fall in sterling prompted by the Brexit vote in June.

In addition, according to the Office for National Statistics, November's Consumer Prices Index (CPI) inflation rate was the highest since October 2014, when it stood at 1.3% and the Bank of England has already forecast much higher inflation rates for 2017.

Despite all of this, the general investor sentiment is directed towards stocks and while this continues will have a dampening effect on precious metal prices. 

Now we know there will be many of you sitting there saying ah yes this is exactly what was said just prior to the market crash in 2008 and we agree. However, we are not seeing the same level of private investors ploughing their savings into the markets but mainly institutions and so do not believe that this is the moment the Stock bubble is due to burst- a correction maybe, but bursting not yet.

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