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Our views 01 November 2023

ClockWise: Trick or Treat? Sentiment is most depressed since the mini-budget

5 min read

Mixed corporate earnings news, concerns about higher interest rates and the re-emergence of geopolitical risk have all combined to send global stock markets to their lowest levels since early summer.

However, it’s usual for market volatility to rise at this time of year, and it’s the seasonal norm for stocks to post their strongest returns between October and May. Could we see the same this time?

Strengthening the case for starting to buy the dip, our proprietary investor sentiment indicator is flashing its most depressed reading since the UK mini-budget crisis a year ago (chart 1), a panic that proved a good buying opportunity. The situation in the Middle East remains very uncertain, and things can always get worse before they get better, but it often pays to invest when others are fearful.

We’re not yet convinced. A resilient US economy could underpin a period of strength into 2024, but if data follows its recent trend lower, markets could quickly return to a more cautious path – good for government bonds, but challenging for stocks, credit markets and also commodities, which could fall sharply as and when geopolitical risk finally abates.

Chart 1: Global equities and Sentiment Indicator

Chart 1: Global equities and Sentiment Indicator

Source: LSEG Datastream as at 30/10/2023

Source: Royal London Asset Management. Composite Sentiment Indicator includes factors based on market volatility, private investor bullishness and US company director dealing. The scale is in standard deviations from average.


This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.