Global investor confidence rose slightly this month, with record highs recorded in some regions – but sentiment remains in negative territory overall.
The State Street Investor Confidence Index (ICI) for October 2016 suggests global investor confidence has reached 99.1, up 3.6 points from September’s revised reading of 95.5.
The improvement in sentiment was driven by increases in investor confidence in key regions. In Europe, investor sentiment rose from 85.4 to 89.1, in North American from 92.3 to 95.4 and Asia from 118.3 to 120.5.
The ICI, developed by State Street Associates’ Kenneth Froot and Paul O’Connell, measures investor confidence and/or risk appetite quantitatively by analysing institutional buying and selling patterns. It assigns a precise meaning to changes in investor risk appetite – the greater the percentage allocation to risky assets, the higher confidence. A 100 reading is neutral, meaning this month’s remains negative.
Froot attributed confidence failing to surpass the 100 mark to “mounting jitters” about the upcoming US presidential election, and concerns regarding market valuation levels. However, he also noted that Asian investor confidence stands at record levels since inception, “implying investors have become more selective in allocating risk”.
Michael Metcalfe, senior managing director and head of global macro strategy at State Street Global Markets, added it was “encouraging” that investor confidence had risen despite the probability of a Fed interest rate hike edging higher in the past two months.
©2016 funds europe
