State Street’s headline Investor Confidence Index (ICI) has crossed the 100-point mark after ten months below it.
The 5.1-points jump between April and May suggests risk appetite is now positive.
State Street’s index measures the buying and selling trends of institutional investors rather than their opinions. A reading of 100 is neutral.
“After 10 consecutive months of readings below 100, global investor confidence is finally picking up steam,” said Rajeev Bhargava, head of investor behaviour research at State Street Associates.
The 102.5-points reading reflects risk appetite at the global level and is driven largely by North America investors, who caused the North American ICI to increase from 95.1 point to 104.1.
The European ICI only rose marginally from 96.2 to 96.9, while the Asian ICI continued to decrease from 104.6 to 101.1.Ken Foot, who co-developed he index at State Street, said European investors were “taking a pause to reflect on elevated valuations in the region following the strong run year-to-date”.
In a commentary this morning, David Lafferty, chief market strategist at Natixis Global Asset Management, possibly summed up the tentative upwards trend in European investor sentiment.
He wrote: “‘How long can the equity rally last?’ is the most frequent question we get from clients and advisors. In one recent meeting, a wealth manager summed it up this way: ‘Investors who haven’t participated in the equity rally want in because they feel like they’re missing it. Clients who have been in are nervous and are thinking about getting out. They can’t both be right’.”
Speaking more broadly about the top-line increase, Rajeev Bhargava, head of investor behaviour research at State Street Associates, said: “Markets continue to anticipate a very gradual course for the Federal Reserve rate hikes, and with hopes for increased infrastructure spending and tax reforms, the North American ICI readings are resonating with the uptick in risk appetite.”
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