Investors turn sour on US shares

Sentiment towards US equities experienced its biggest monthly drop since 2013, falling by 12.2 per cent to -2.3 per cent this month, according to research by Lloyds Bank.

Similarly, the latest Bank of America Merrill Lynch survey revealed that fund managers’ allocation to US equities fell by 1 per cent to become a 10 per cent underweight in April. The fear of a trade war between the US and China remains a top-cited risk and it is the cause for this fall in sentiment.  

Tariffs proposed by the US were widened to include over a thousand Chinese products, from industrial robots to aeroplanes. Meanwhile, China announced it will retaliate with tariffs on US soy beans, cars and chemicals. 

As a result, US share prices were down 2.4 per cent as the US market returned to ‘correction’ territory and the threat of regulation hit big technology stocks. Nevertheless, US share prices are 11.7 per cent higher than this time last year, according to Lloyds, reflecting a robust economic backdrop aided by tax cuts and regulatory easing in the financial sector.

Markus Stadlmann, chief investment officer at Lloyds Bank Private Banking, says: ‘The current political backdrop is unsurprisingly impacting on global equity markets. A fall in sentiment reflects investor concerns about the impact of a trade dispute between the world’s two largest economies, the United States and China.'  

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However, he adds that despite these concerns, most of the world’s economies are experiencing good growth. ‘The recent correction has led to lower share prices, leading to some attractive opportunities for long term investors in equity markets, and inflation continues to grow modestly in most developed nations; consequently the overall sentiment remains positive.’

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