The Global Investor Confidence Index decreased to 79.2, down 0.9 points from September’s revised reading of 80.1. The decrease in investor sentiment was driven by a 4.3 point drop in the North American ICI to 67.6 and a 1.5 point drop in the Asian ICI to 85.6. Meanwhile in contrast, the European ICI increased substantially for the second month in a row, rising from 107.4 to 132.9.
“Even with the stock market reaching new highs, US investor confidence declined further in October,” said Marvin Loh, senior macro strategist, State Street Global Markets. “Despite a more accommodative Fed, deepening geopolitical risks coupled with historically rich equity valuations in the US appear to be having a detrimental effect on investor sentiment right now.”
“European investor confidence rose sharply again in October as positive developments in Brexit negotiations and trade war talks sparked large-scale equity purchases in the region,” commented Kenneth Froot. “These events have prompted institutions to reduce cash levels; purchasing both equities to capitalize on pro-risk developments, and bonds to capitalize on an increase in yields.”
The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Markets’ 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.