Hargreaves Lansdown: Investors buy income funds as confidence in global markets dips

global market

The HL Investor Confidence index has increased by 8 points this month, up to 77. Confidence has decreased in the Asia Pacific, European, Global Emerging, Japanese and North American sectors and risen in the UK sector. Investors favoured income and passive plays amidst the uncertainty.

Emma Wall, Head of Investment Analysis and Research, comments:

“It has been a stellar start to the year for the FTSE 100, rallying to within a whisper of its all-time-high level by mid-month. Most markets have had a happy start to the New Year, trading higher than they began 2023, but coupled with considerable volatility.

“The S&P 500 in particular experiencing choppy waters thanks to market-unfriendly forward guidance on the Fed’s interest rate policy. Europe faces similar concerns, with President of the European Central Bank Christine Lagarde vowing to stay the course on rate rise strategy. Asian markets have been affected by caution over China’s economy opening up post-COVID lockdowns. It is not surprising therefore, to see the UK as the only market that investors are feeling more positive about this month.

While markets may be positing positive returns, uncertainty abounds. This is translating into trades on the platform too, with an eclectic mix of risk on and risk off choices, as investors are divided on the outcome for their portfolio selections. Two themes have emerged however – a preference for passives amongst fund investors, not surprising given 2022 was a poor year for active management in all sectors bar US equities.

“Broad-based trackers mean investors will benefit whether it is growth or value that outperforms in 2023, though it also means they’ll capture all the market downside in a slump. The other theme is income – particularly for investment trust buyers. Three of the top 10 most bought trusts are AIC dividend heroes, meaning they have increased their dividend for more than 20 years in a row, and one is a next-generation hero – meaning it has increased pay-outs for a decade plus. A further two trusts in the top 10 target income and growth, suggesting in turbulent times, where capital is likely to fluctuate, investors are looking for the comfort of a dependable dividend.”

Investor confidence – global sectors 

Top funds and investment trusts on the HL platform 

Top Funds, January 2023 (net buys, alphabetical)
Baillie Gifford American
Fidelity Index World
Jupiter Asian Income
Jupiter Global Value Equity
Jupiter Income
Legal & General European Index
Legal & General International Index Trust
Legal & General UK 100 Index Trust
Legal & General US Index
Vanguard LifeStrategy 100% Equity
Top Investment Trusts, January 2023 (net buys, alphabetical)
BlackRock World Mining Trust
City Of London Investment Trust
F&C Investment Trust
Finsbury Growth & Income Trust
JPMorgan China Growth & Income
Law Debenture Corporation
Merchants Trust
Ruffer Investment Co Ltd
Supermarket Income REIT
Tritax Eurobox Plc

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