The survey, now in its sixth year, shows that half (50%) of UK respondents are more confident today in the UK stock market compared to 12 months ago, with a return to levels of confidence last seen four years ago.
The results generally reflect a positive mood from investors with expectations of a steady rise in the UK base rate next year rather than any nasty surprises or big interest rate hikes. Nearly half (49%) of those surveyed think that UK base rate will be no more than 1% by December 2011 while 29% predict it to rise up to 2%. In comparison, only 2% of those surveyed think UK base rate will increase to over 4% in the same period.
Historically, a low base rate is an upward driver of the FTSE 100 and this is also borne out in the survey findings with two-thirds (66%) of UK respondents expecting the FTSE 100 to trade at around 6,000 points by December 2011. There are already signs it could hit this mark this year and it will be the first time the FTSE 100 has reached the 6,000 point mark since May/June 2008.
Furthermore, the respondents are even showing cautious optimism around the shape of the UK economy – with the results trending towards a recovery compared to this time last year. Nearly half (43%) of those surveyed believe the economy is in a “V-shaped” recovery, up from 37% in 2009. In contrast, only 3 in 10 (30%) now believe the economy is in a “W-shaped” double-dipped recession, which is down from 36% last year, and only 19% continue to feel the UK is in an L-Shaped depression (cf. 2009: 20%).
Commenting on the results, Darren Hepworth, trading and customer services director of TD Waterhouse UK, said: “The results of the TD Waterhouse sixth annual Investor Confidence Index show that UK investors now have more balanced levels of confidence in the UK stock market following the highs and lows of the last few years, and this is more in line with the levels of investor sentiment we were seeing before the crisis hit in 2007.”
The independent research findings also show that three-quarters (74%) of UK investors admit to having changed their investment approach as a result of the global downturn. However, 58% also say they are satisfied with the performance of their portfolio over the past 12 months, with only 15% dissatisfied.