Investor confidence remains low as economic activity restarts

Global investor confidence was not much uplifted in May, growing only 0.3 points to a reading of 73.3, where a reading of 100 would be neutral.

The slight increase in State Street Global Markets’ global index was primarily driven by the European ICI, which rose 6.3 points to 108.6. Meanwhile, the North American ICI and Asian ICI each dropped 0.3 points, to 67.8 and 80.5 respectively.

“The shifting focus from country lockdowns to restarting economic activity allowed the Investor Confidence Index to remain mostly unchanged in May,” comments Marvin Loh, senior macro strategist, State Street Global Markets.

He adds: “The slowing of Covid-19 cases in Europe and the phased restart of its most impacted economies lifted sentiment by 6 points, recovering most of the losses from the prior few months. Expectations of additional fiscal and/or monetary stimulus from Europe also contributed to the improving tone. However, the North America ICI was minimally impacted, as the progression of the virus is still on a path towards peaking, while concerns remain over reinfections as all US states have at least begun to partially reopen.”

The Global Investor Confidence Index 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 neutral reading 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.