Investor confidence has improved in August despite uncertainty, says Hargreaves Lansdown

The analysts said confidence in the UK has improved at a time of double digit inflation and political uncertainty, although investors are most bullish about the US market

Emma Wall, Head of Investment Analysis and Research, at Hargreaves Lansdown, said: “It’s been a volatile year for global markets – war, inflation, central bank policy, threat of recession have all played their part in scaring investors off stocks.

"In June this year, investors took £4.5 billion out of funds, according to data published today by the Investment Association (IA) - the highest monthly outflow of the year so far and the second highest on record. But July bought some respite."

Though the cost-of-living crisis remains unabated, soaring inflation is no longer a shock, and markets hate shocks far more than bad news, said Ms Wall.

Forward guidance on interest rate rises from both the Bank of England and the Federal Reserve, and some signs of stability in the oil market meant that global markets tempered and as such investor confidence has improved in August.

She added: "All global regions saw improvements in confidence, with the US seeing the largest jump of 27%. The UK increased too, despite double digit inflation and political uncertainty. Europe remains the region where investors hold the least optimism, but confidence even there improved by 8%.

"Fund flows on the HL platform over the last month reflect the renewed confidence, with clients opting for higher-risk equities such as emerging markets, small caps and growth-style funds. Similarly the most bought investment trusts tilt towards high-growth and smaller companies as well as dividend payers, while ETF flows reveal a bias for the US – where clients have most confidence on the market outlook.”