The State Street Global Investor Confidence Index fell to 108.8 in Janury, down 1.7 points from December’s revised reading of 110.5 driven by a decrease in the North American ICI from 110.5 to 108.8 along with the Asian ICI falling 1.5 points to 102.9, and the European ICI falling 0.1 points to 103.4.
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.
"We have seen an unprecedented slide in stock markets around the globe,” says Jessica Donohue, executive vice president and chief innovation officer, State Street Global Exchange. “Tumbling oil prices, a reaction to slowing demand in the face of a supply glut, and changing growth dynamics in China chipped away at investors' confidence over the past month.”
"Fears around weakening Chinese growth and the collapse in oil markets has caused institutional investors to believe the additional spending released into the hands of consumers in non-commodity producing country makes even this steep and sudden downdraft a buying opportunity,” says Ken Froot. “Perhaps 2016 will be a happy new year after all.”