Investor sentiment has dropped to the lowest level recorded so far in 2017, with UK asset classes in particular losing favour with investors, according to the Lloyds Bank Investor Sentiment Index for July.
This month, investor sentiment has fallen to its lowest level this year so far, dropping by 3.7 percentage points, from 6.29% to 2.59%.
Eight out of 11 asset classes observed saw a fall in sentiment, with UK equities being the biggest faller, down by over 10 percentage points from 13.5% to 2.75%.
This significant drop came during the period following the UK General Election and as the country continues to negotiate its exit from the European Union. However, overall sentiment remains at 7.34%, higher than this time last year and during the immediate aftermath of the EU referendum.
In terms of asset classes, UK bonds were the second biggest faller, going deeper into negative territory, dropping by 8.72 percentage points from -1.05% to -9.77%.
But despite a "subdued" July, UK property and UK equities are still amongst the best performers over the past year, while the two assets classes have seen increases in sentiment of 19.97 and 18.05 percentage points, respectively, since December 2016.
Meanwhile, Japanese equities and commodities saw a minor upturn in popularity during the month, both increasing by 0.59 percentage points.
Overall, gold is still the most popular asset class even though it saw the biggest reduction in confidence over the past year, experiencing a fall of 17.24 percentage points.
In asset class performance terms, only three were in positive or neutral territory - Japanese equities (+2.4%), US equities (0.5%) and cash (0%).
As with investor sentiment, UK equities also saw a dip in performance, but this was more modest than the reduction in confidence.
Markus Stadlmann, CIO at Lloyds Private Banking, said: "After the highs come the lows, and it appears that investors are feeling less confident following the UK General Election.
"In May, we saw investor sentiment reaching levels not recorded since April 2016, but this month's sharp decline - particularly towards UK assets - suggests that the election outcome and ensuing political dynamics have caused uncertainty in the markets.
"A reversal of bond market trends was not helpful either. In the UK and elsewhere, markets have been very sensitive to perceived changes in communication by monetary policy makers."
He added: "Whilst we do not expect the end of asset purchases by central banks alone to cause an unmanageable fall in bond prices, investors are rightly concerned.
"There are several other factors to consider when assessing the future development of global sovereign bond yields, most importantly the growth and inflation outlook, as well as financing requirements. When looking closely at these factors, none of them makes the fixed interest outlook any brighter.
"Finally, the fall in sentiment towards gold is not overly surprising. We anticipate that it will struggle over the next year, dented by rising interest rates after inflation and a strengthening US dollar."
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