Investor Confidence Falls Again in April

After two positive months the State Street Investor Confidence Index (ICI) has now fallen for two consecutive months, the global index falling 6.6 points from March’s revised reading to 92.9.

The decrease was led by an 8.0 drop in North American ICI to 95.2 as well as a 6.7 drop in European ICI to 76.2. In contrast, Asian investors are more positive, the Asian ICI rising 2.4 points to 92.0.

The Investor Confidence Index was developed at State Street Associates, State Street Global Markets’ research and advisory services business, in partnership with FDO Partners. 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.

“Risk Appetite continued to contract in April as the Global ICI fell just over 6 points, retracing almost all of its gains since the beginning of 2022,” says Rajeev Bhargava, head of investor behaviour research, State Street Associates. “The increasingly hawkish stance from the Fed in the face of surging inflation coupled with dampened global growth expectations likely drove aggregate risk sentiment lower. Interestingly, Asia was the only region that witnessed gains this month. However, with COVID infection rates soaring in some regional markets and the resultant lockdowns impacting economic activity, it remains to be seen if this constructive path persists.”