Lack of a ‘Santa Claus’ rally sees Irish investor sentiment dip

Poor market performance in the run-up to Christmas saw investors confidence in the outlook for markets slump in December, a new survey shows. Savers, however, were more upbeat and were keen to save more, despite on-going record low interest rates.

The Bank of Ireland/ESRI Savings and Investment Index, which measures sentiment towards saving and investment, slipped from 100 to 99 in December 2018, as investment sentiment fell to a record low.

Tom McCabe, of Bank of Ireland Investment Markets, said the much hoped for "Santa Claus rally" didn't materialise for investors in December, as stock markets shed another 8 per cent for Irish investors, amid concerns about the 2019 economic outlook.

“Against this backdrop it’s not surprising to see Irish investor sentiment hit a record low in December. The Irish response to the recent market volatility wasn’t out of line with international norms with a number of global investor surveys showing that equity market sentiment hit two year lows in December. In the short term however, some improvement in market conditions and the geopolitical outlook are vital if Irish investor sentiment is to stage a recovery over the next few months,” he said.

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The survey shows that more than one quarter of Irish investors felt it was a bad time to invest in December, the highest reading since launch, while the percentage of regular investors dropped to 32 per cent in December from 34 per cent previously.

However, while the mood might be muted among investors, there is a clear split in sentiment when it comes to savers, as Brexit concerns helped to push saving sentiment to four month high.

Indeed the monthly Savings Index rose to a four month high of 103 in December from 100 in November, driven by improved attitudes towards saving and a brighter outlook for the savings environment.

“The improvement in peoples’ outlook for the saving environment in December was notable, given it has weighed on saving sentiment in recent months. However, it is unusual for saving sentiment to improve in a month typically dominated by spending.

Overall, it’s hard to escape the feeling that the rise in saving sentiment and the collapse in investment sentiment in December were two sides of the same coin, in other words a direct response to rising financial and geopolitical risks,” Mr Cabe said.

The survey found that more people were saving regularly in December, with the percentage up to 49 per cent from 47 per cent in November, fuelled by improved participation from younger savers in particular. On a geographical basis, the survey found that the percentage of regular savers in the border midwest region rose sharply from 34 per cent in October to 44 per cent in December.