The State Street Investor Confidence Index (ICI) for January 2015 decreased to 106.7, down 5.5 points from December’s revised reading of 112.2.
Investors in Europe recorded the largest decline in sentiment, with the European ICI falling 5.7 points to 113.9, from December’s revised reading of 119.6. In North America, the ICI fell by 1.1 points to 101.8, while in Asia the ICI also fell by 1.1 points to 99.6.
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.
“Global deflationary fears, geopolitical risk and European political volatility led to declines in sentiment in January,” says Froot. “Given soft inflation and retail sales in the US, all eyes will be focused on the Federal Reserve on Wednesday to see if the FOMC stays on track to raise rates in Q2.”
“The decline in sentiment was again driven by European investors,” says Jessica Donohue, executive vice president and chief innovation officer, State Street Global Exchange. “It will be interesting to see whether recent sovereign quantitative easing.
