The State Street Global Investor Confidence Index decreased to 76.5 in January, down 3.2 points from December’s revised reading of 79.7. The North American ICI fell 3.4 points to 68.2 and the European ICI dropped from 109.4 to 105.5, a 3.9 point decline. Meanwhile, the Asian ICI rose 4.8 points to 93.9.
The Investor Confidence Index 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.
“It is telling that the confidence of European investors has continued to fall. This is similar to the first round of asset purchases from the European Central Bank (ECB) that the promise of buying has as big – if not bigger – signaling effect for investors than the action of buying itself,” says Michael Metcalfe, head of Global Macro Strategy, State Street Global Markets. “Meanwhile, the cutoff date for this reading (1/22/2020) means that the potential impact of the escalated contagion from the Novel coronavirus on sentiment will not be captured this month.”
