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Over two thirds of fund managers say they expect the UK economy to improve in the next 12 months
Sentiment correlates closely with movements in the market
Q4 spike in optimism makes confidence highest since survey began
New research from leading
spread betting and CFD provider, Capital Spreads, has found that City investors' confidence in Q4 2012 has risen dramatically from the gloomy sentiments in Q3 2012, with 69 per cent of fund managers believing that the economy will improve in the next 12 months, whilst only 8 per cent predict that the economy will weaken.
The survey results reflect the more bullish mood in the markets and suggest, with the UK recently bouncing back from its double-dip recession growth fund managers appear to believe that a meaningful recovery in the UK economy is imminent. This quarter's results are in fact the most positive since the survey's inception, heralding a surge in optimism for the year ahead.
What is even more interesting to note is that the level of confidence seems to be closely correlated to rises and falls in the FTSE 100.
Capital Perspectives Survey, conducted in
November 2012 which polled fund managers from 200 of the City's major investment houses, with collective assets under management in excess of
$10 trillion, found that their optimism paints a significantly more positive picture to Q4 2011, when only 35 per cent were optimistic about the UK's economic prospects and 19 per cent said the economy would contract.
Angus Campbell, Head of Market Analysis at Capital Spreads, said: "It is clear that rising and falling markets have a corresponding effect on and a very close correlation to investor sentiment. During bull markets we all feel better about the economic prospects going forward, but the exact opposite when markets are declining. As we head towards the end of 2012 and as the FTSE 100 has rallied higher over the summer, there's clearly renewed confidence about the UK's economy, however as we've seen from the past this can turn on a
sixpence and if the markets start to head lower again we can expect to see confidence take a dive too.
"With so much at stake in terms of the ongoing eurozone crisis, uncertainty over the US fiscal cliff and the recent downgrade by the OECD to not just their UK's GDP forecasts but their expectations for global growth there's every chance we could see this level of confidence decline in the early part of 2013 and it will be interesting to see if this is preceded by a fall in the FTSE 100."