Investor Confidence off the Highs
Posted by Colin Lambert. Last updated: November 28, 2021
The latest State Street Investor Confidence Index (ICI) for November 2021 has dropped from a series of strong months, decreasing 110.5. This is a drop of 3.6 points from October’s revised reading of 114.1 and was led by North American ICI, which dropped 5.3 points to 108.7. Asian ICI was up a more modest 4.8 points to 108.1, and European ICI ticked down 1.4 points to 95.3.
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.
“Investor sentiment remained near its 3-year high in November, although the Global ICI has eased off the strong levels recorded last month,” says Marvin Loh, global macro strategist, State Street Global Markets. “The overall positive tone in risk assets pushed global equity bourses to multi-year highs, led by North America, with US equity investors looking past the start of Fed tapering, higher inflation readings and more aggressive rate hike expectations. Investor’s willingness to look through surging inflation will be key to maintaining the overall investor confidence that has emerged globally this year.”