The State Street Global Investor Confidence Index increased to 102.1 in January, up 6.4 points from December’s revised reading of 95.7.
Investors across all regions showed an improved appetite for risk, with the European ICI rising by 16.0 points to 113.4, the Asian ICI increasing by 6.1 to 100.8, and the North American ICI increasing by 1.7 points to 97.2.
The Investor Confidence Index was developed by Kenneth Froot (pictured), 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.
“Global equities have seen the best start of a new year in three decades. Stocks are hitting all-time highs, earnings forecasts are rising, and positive earnings surprises have outweighed disappointments across global markets. Given this backdrop, it is not surprising that global institutional investor confidence is showing signs of optimism,” says Froot.
“We seem to be witnessing a sense of confidence in Europe after two years of subdued risk appetite,” says Rajeev Bhargava, managing director and head of Investor Behavior Research, State Street Associates. “Improving European economic growth, subsiding political uncertainties, and the European Central Bank’s accommodative policies are possibly feeding into stronger enthusiasm.”
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