Investor Confidence Climbs in August
Posted by Colin Lambert. Last updated: August 31, 2022
Investor confidence climbed for the second successive month according to the State Street Investor Confidence Index (ICI) for August.
The Global Investor Confidence Index increased to 107.3, up 5.1 points from July’s revised reading of 102.2. The increase was led by a 20.4 point jump in European ICI to 106.0, while North American ICI rose as well, up 2.1 points to 106.5. Asian ICI, meanwhile, fell 0.9 points to 92.4.
The Investor Confidence Index was developed at State Street Associates and measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors. It 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.
“Risk appetite in August continued on a positive path as the Global ICI rose just over 5 points to 107.3, largely fuelled by an uptick in sentiment across US and in particular European investors,” says Rajeev Bhargava, head of investor behaviour research, State Street Associates. “Despite the many potential headwinds, including rising inflation concerns and energy security facing the European economy, interestingly, European investors have moved from a risk averse posture to a more neutral posture over the past month as markets rallied through much of August. Even after the selloff over the past week, net flows by European investors have been from developed to emerging market stocks, which has driven up the confidence score.
“However, it is going to be important to monitor whether the enthusiasm persists given recent heightened volatility in equity markets on the back of increasingly hawkish Fed speak,” he adds.