Investors are backing gold to shine in 2019; but expect further falls for UK shares

On the whole investors are adopting a cautious stance, according to findings from two separate surveys.

Investors are becoming increasingly cautious on the prospects for equity markets, according to findings from two separate surveys.

The pessimistic stance is highlighted first by a survey carried out by Legg Mason, which polled the views of over 16,000 investors globally. When asked to name the one investment they expect to shine more than any other in 2018, gold came out on top (taking 25% of the vote, up from 22% last year).

In a further sign of investor caution, a further 19% gave cash the thumbs-up as their preferred asset class for the coming 12 months, up from 14% the year before.

Gold is viewed by many as the standout safe haven investment. The yellow metal is seen as an insurance policy, due to the fact that it is genuinely uncorrelated to the fortunes of equity markets.

Against that, one of the main downsides is that gold does not have a yield, nor does it generate cash flow or profit. It is therefore difficult to value. Instead its price simply reflects what the next person is prepared to pay for it, so it tends to be volatile.

This year has been a case in point. Investors who had allocated to gold at the start of the year have seen its price fall from $1,302 to $1,233, a loss of 5%.

Commenting on the findings, Alex Barry, head of UK distribution at Legg Mason, says: “It is perhaps understandable that, after such a prolonged bull market for equities, investors have once again looked to safe havens such as gold and cash.

“We understand the need for investors to protect themselves. However, they must consider the return profile of such assets. Taking gold as a case in point, the asset has failed to deliver for investors this calendar year, and it remains hard to see a catalyst for it currently.”

Separately, a survey from Willis Owen polling 984 UK retail investors found that half expect the UK stock market to fall between now and April. Nearly one in five (17%) expect the UK stock market to fall by over 10% between now and then, and 6% anticipate a correction of more than 15%.

Of those expecting the UK stock market to fall, 71% cited Brexit as a key reason for their pessimism.

Adrian Lowcock, head of personal investing at Willis Owen, says: “Even after the sell-off in markets in October, investors remain nervous of the UK market. Our research reveals Brexit is putting off investors, and this is a dominant trend across both professional and retail investors and is reflected in industry-wide data.

“However, investors should think longer-term when considering their portfolios. The UK looks good value for long-term investors.”


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