European investor sentiment dropped by seven points in January, driving a global decline in investor confidence.
The seven-point decline in Europe was the main cause of a 0.3 points decline globally in State Street’s Investor Confidence Index (ICI). By contrast the North American ICI rose by 2 points during the month.
Rajeev Bhargava, head of investor behaviour research at State Street Associates, said that concerns surrounding the impending French and Dutch elections as well as a hard Brexit may have fuelled this decline in European sentiment.
Ken Froot, who was involved in developing the index, said stretched valuations and geopolitical risk did not support positive global sentiment at the start of the year.
The index measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors. 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 current global ICI is at 93.8 while the European ICI has dropped to 92.9. The only region with a positive reading – that is above 100 – is Asia; its ICI stands at 108.1.
“While financial markets crave political stability, political change is disruptive. With the new US administration taking office mid-month, worries about trade policies and a stronger dollar have taken centre stage in 2017,” said Froot.
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