State Street Global Exchange today released the results of the State Street Investor Confidence Index® (ICI) for September 2014.
The Global ICI increased to 123.9 in September, up 3.8 points from August’s revised reading of 120.1. Investors in both North America and Asia displayed lower risk appetite, with the North American ICI falling 5.1 points to 103.0 and the Asian ICI declining by 4.5 points to settle at 97.1. In Europe, by contrast, confidence continued its recent uptrend, rising 12.6 points to reach a level of 140.0.
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 analyzing 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.
“The most striking element of this month’s results is the increase in the European ICI, to a level of 140, an all-time high for the Index,” commented O’Connell. “Despite the visible evidence of relatively poor growth performance across Europe, investors are expressing demand for equity as opposed to fixed income investments in the region. This may partly be driven by the relatively favorable valuations currently reflected on European bourses.”
“Given the generally strong patterns observed in recent US data releases, the reduction in North American confidence may reflect the balancing act that the US Federal Reserve is engaged in with respect to monetary policy,” said Jessica Donohue, chief innovation officer and head of research and advisory services, State Street Global Exchange. “Investors are weighing the potential impact of interest rate increases across various sectors in the economy, and this is giving rise to some caution.”
