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State Street Ken Froot

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Investor confidence down 7.2 points in November to 106.8

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Investor confidence took a tumble in November according to the State Street Investor Confidence Index (ICI) which dropped 7.2 points for the month to 106.8.

The decline in sentiment was driven by a decrease in the North American ICI from 124.8 to 112.9 along with the Asian ICI falling 9.3 points to 100.7.  By contrast, the European ICI rose by 6.3 points to 96.5.
 
The Investor Confidence Index was developed by Kenneth Froot 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.
 
“In November, the spotlight was once again on the Fed as investors adjusted to an increased probability of a December rate hike,” says Ken Froot. “The North American sentiment resonated globally, signalling investors’ lack of readiness for US policy normalisation, even if the pace is expected to be gradual.”
 
“European sentiment has seen some improvement in response to the prospects of further ECB stimulus,” adds Jessica Donohue, executive vice president and chief innovation officer, State Street Global Exchange. “Divergence in monetary policy however, was not enough to bring European sentiment above the risk averse threshold.  Moreover, Asian optimism has seen a sharp turnaround as a stronger dollar and continued commodity price declines weigh heavily on the region.”

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