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State Street Ken Froot

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Investor confidence up 3.6 points to 99.1 in October

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The State Street Investor Confidence Index (ICI) increased to 99.1 in October, up 3.6 points from September’s revised reading of 95.5.

The increase was driven by an increase in the European ICI from 85.4 to 89.1, along with the North American ICI rising from 92.3 to 95.4 and the Asian ICI rising from 118.3 to 120.5.
 
The Investor Confidence Index was developed by Kenneth Froot (pictured) and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business.
 
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.
 
“Amidst mounting jitters about the upcoming US presidential election and concerns regarding market valuation levels, global investor confidence remains shy of the 100 level," says Froot. "It is worthwhile to highlight that Asian investor confidence stands at record levels since inception implying investors have become more selective in allocating risk."
 
“Investor confidence has now risen for two consecutive months and has recovered its losses following the Brexit vote,” says Michael Metcalfe, senior managing director and head of global macro strategy, State Street Global Markets. “Moreover, the fact that investor confidence has risen even though the probability of a Fed interest rate hike has also edged higher in the past two months is encouraging.”

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