State Street’s headline Investor Confidence Index (ICI) fell slightly in June after picking up steam recently.
The Index now stands at 101, down from May’s revised reading of 102.6. As the index is still above 100 points, it suggests investors are mainly taking risk.
Confidence among both Asian and North American investors declined, with the Asian ICI falling 4.4 points to 97.1, and the North American ICI falling 2 points to 102.2.
European investor confidence continued to edge up slightly, with European ICI increasing by 1.7 points, from 96.8 to 98.5.
State Street’s index measures investor confidence or risk appetite quantitatively by analysing the buying and selling patterns of institutional investors. The greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral.
Ken Froot, professor of business administration at Harvard, said: “May’s note of optimism after months of de-risking did not strengthen in June, with the Global ICI numbers hovering over the neutral 100-level mark. Even in North America, while the index remains in a ‘risk-on’ territory, the decline in investor confidence was likely driven by intensified concerns around overvaluation, oil prices and the US energy policy, as the Fed delivered its second rate hike in 2017.”
Timothy Graf, a regional head of macro strategy at State Street, added: “Sentiment remains rather subdued across regions as investors do not appear to enthusiastically endorse the steady climb of risky asset valuations. The neutral read on investor behaviour disproves the notion of market complacency in the face of many latent risks.”
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