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Ken Froot, State Street

Investor confidence up by 4.8 points in March to 111.9

The State Street Global Investor Confidence Index increased to 111.9, up 4.8 points from February’s revised reading of 107.1.

Investors across all regions expressed an improved appetite for risk, with the North American ICI rising by 5.8 points to 109.8, the European ICI increasing by 1.6 points to 102.1, and the Asian ICI increasing by 1.3 points to 109.6.
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.
“After a volatile February, institutions seemed to have re-embraced risk in March, with the ICI rising across all the regions we track,” says Froot. “However, increasing rhetoric over protectionist policies and fears over a potential trade war are still festering and have the potential to impact confidence.”
“Although the global ICI increased this month, it will be interesting to see if continued Federal Reserve tightening and recent money market stress, highlighted by rising US LIBOR-OIS spreads, will impact investor sentiment going forward,” says Rajeev Bhargava, managing director and head of Investor Behavior Research, State Street Associates.

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