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Kenneth Froot, State Street

Investor confidence increases by 2.6 points in April


State Street’s Global Investor Confidence Index (ICI) increased to 99.5 in April, up 2.6 points from March’s revised reading of 96.9. 

Confidence among the North American investors improved with the North American ICI rising 4.6 points to 98.3.
 
The European ICI also rose from 94.8 to 96.1.
 
Meanwhile, the Asian ICI declined by 5.1 points from 109.8 to 104.7.
 
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 analysing 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.
 
“April has seen some improvement in North America and Europe despite looming geopolitical tensions and policy uncertainty in the US and abroad,” says Froot. “Our measure of the global investor confidence has been on the uptick for two consecutive months and resonated with the improving global growth outlook and expectations of higher inflation. Still shy of the 100 level mark, investors' risk appetite appears to be on hold as they await details of a new US tax plan and a possible resurrection of health care reform act.”
 
 “April’s index was calculated before France went to the polls, but it is telling that European investor confidence was still edging higher even then to mark the second consecutive monthly gain. It is suggestive that concerns at the start of the year about European political risk, along with weak growth, may have been overplayed,” says Michael Metcalfe, senior managing director and head of global macro strategy, State Street Global Markets.  

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