The State Sreet Global Investor Confidence Index decreased to 83.9 in September, down 2.2 points from August’s revised reading of 86.1.
The drop in Investor Confidence was driven by decreases in European ICI, down 12.0 points to 110.6, and Asian ICI, down 5.6 points to 84.4. Meanwhile, North American ICI rose slightly from 77.6 to 78.8.
The Investor Confidence Index was developed at State Street Associates, State Street Global Markets’s research and advisory services business, in partnership with FDO Partners. It measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.
“Risk appetite fell slightly in September as global equity markets broadly fell for the first time in six months,” says Marvin Loh, senior macro strategist at State Street Global Markets. “Investors continue to closely monitor the path of the virus, which has seen an uptick in new cases globally as well as in counties that had initially successfully lowered their infection rates. Recent meetings of the central banks also figured prominently into this month’s reading, and the broad consensus was generally a disappointment in their lack of action. While US markets were the most volatile in September, sentiment for the North American ICI was impacted only slightly. Europe’s ICI decreased by double digits as sentiment around tense Brexit negotiations and virus concerns offset constructive stimulus and Covid containment gains from prior months.”
