Investor sentiment turned negative in September with fears that the economic recovery will be derailed by a second wave of COVID-19. Political uncertainty provided another reason to unsettle investors with new concerns over a no-deal Brexit continuing to weigh on sentiment for UK stock markets in particular.
Overall, with the exception of Japan, global stock markets saw some of the recent gains wiped off in September (Source FE Analytics). A sharp sell-off in US technology shares was a key feature as investors became concerned with valuations, following some extreme share price rises year to date.
The UK stock market continues to underperform and is likely to remain challenging until there is either a COVID-19 vaccine or a Brexit deal signed with the EU. In reality, probably both are needed. But it can be easy to write off markets that have underperformed for a long period, and UK equities are certainly very unloved at the moment. But for contrarian investors this offers hope of longer-term recovery potential. That is if you are prepared to hold your nose and wait.
The more negative tone in investor sentiment has had a positive effect on lower risk Government bonds, which outperformed equities and higher risk areas of bond markets, such as emerging market bonds and high yield corporate bonds (Source FE Analytics).
The information in this post is not financial advice, it is provided solely to help you make your own investment decisions. If you are unsure about whether an investment is appropriate for you, please seek professional financial advice. You can find more information here.
When you invest you should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future return.