State Street Global Exchange’s Global Investor Confidence Index (ICI) decreased to 98.9 in November, down 0.3 points from October’s revised reading of 99.2.
The decline in sentiment was driven by the 4.6-point decrease in the Asian ICI to 116.1 and the 2.6-point decline in the European ICI to 86.5.
The North American ICI rose slightly from 95.6 to 95.7.
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.
“While global markets continue to decipher the economic and political effects of a Trump presidency on the heels of Brexit, the decline in the Global Index suggests that institutional investors remain reluctant to embrace market reactions,” says Froot. “It is yet to be seen whether the stress deriving from upcoming events, such as the OPEC meeting in November and the ECB and FOMC meetings in December, will have any additional impact to the risk sentiment before year-end.”
“Looking at investor confidence regionally, the setbacks in the ICI this month were felt most strongly by Asian-based institutional investors. Trump’s victory has clearly exacerbated anti-globalisation jitters,” says Jessica Donohue, executive vice president and chief innovation officer, State Street Global Exchange. “Moreover, confidence in Europe further declined to the mid-eighties, a relatively low level, as the UK’s exit from the European Union and Italian political risk remain a source of major concerns.”