The State Street Global Global Investor Confidence Index decreased to 94.3 in August, down 7.4 points from July’s revised reading of 101.7.
Confidence among North American investors declined, with the North American ICI decreasing from 103.1 to 92.5. Meanwhile, the European ICI rose by 8.1 points to 99.5 and the Asia ICI decreased by 0.9 points to 102.6.
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.
“After a few months of caution and measured risk appetite, global institutional investors have started to display risk-averse behaviour as they navigate through elevated trade uncertainty and geopolitical turmoil. This sentiment was also seen across global equity markets as defensive sectors outperformed. The decline in confidence was particularly apparent for North American investors, with the North American ICI recording its lowest reading of the year,” says Froot.
“Looking at the regional breakdown, the European ICI has exhibited a lot of volatility this year,” says Rajeev Bhargava, head of Investor Behavior Research, State Street Associates. “President Trump’s trade policies continue to stir up investor uncertainty, in addition to the renewed worries over Italy’s debt burden.”