The latest Investor Sentiment Index from Lloyds Bank Private Banking has found investor sentiment has taken a significant hit following the turbulent start for equity markets in 2016.
Overall investor sentiment has fallen to its lowest level since May 2013, according to the Index.
Sentiment towards UK equities is now at its lowest level since the Index began in March 2013.
It has fallen by over six percentage points in the past month to a level of 6.38%.
US equities experienced a similar dip in sentiment, falling by 6.59% during the month to -0.80%, their lowest level since November 2013.
Both UK and US equities also experienced their biggest ever year-on-year falls in February, with sentiment towards these two asset classes plummeting by 22.73% and 18.31% respectively.
Investor sentiment towards gold has risen by 8.57% over the month, at a time when gold has been one of the best performing asset classes.
It has now overtaken UK equities as the second-most favourable asset class, behind UK property.
The other positive actual market performance change over the past month was in government bonds, which improved by 2.2%.
This asset class has experienced a 3.4% improvement in value over the past six months, making it the top-performing asset class over this period.
However, investor sentiment has not reflected this, with confidence in government bonds dropping by 3.87% this month, following a fall of 4.08% in January.
Investor sentiment is essentially a measure of investor fear and greed, which can be an interesting measure for investors to consider.
One of my favourite quotes by investing guru Warren Buffett is:
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
With investor sentiment often driven by recent market performance, at times when investors appear to be fearful it can make real sense to consider being greedy.
Of course this approach must fit with your long-term financial goals, attitude towards investment risk and capacity for losses.
How is your sentiment as an investor right now?