Investor Confidence Rises Again
Posted by Colin Lambert. Last updated: April 28, 2023
Investor confidence has risen for the fourth consecutive month, however it still remains in cautious territory according to the State Street Investor Confidence Index (ICI) for April 2023.
The Global ICI increased to 83.5, up 2.2 points from March’s revised reading of 81.3 (originally 81.4), however confidence was mixed across regions. The North American ICI rose 1.6 points to 75.5, while the European ICI fell 6.4 points to 111.2 and the Asian ICI dropped 2.6 points to 89.3.
The Investor Confidence Index was developed at State Street Associates, State Street Global Markets 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.
State Street says the index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.
“Despite relative stability in the US banking sector, institutional investors globally remained cautious in April as the Global ICI stayed well below neutral with a reading of 83.5,” says Marvin Loh, senior global macro strategist at State Street Global Markets. “While the North America ICI posted a marginal 1.6 point increase to 75.5, it maintained the weakest regional reading as investors continue to navigate through banking stress and Fed tightening. In contrast, despite a drop in April, the 112.2 ICI reading for Europe remained at near two-year highs, with this region signalling the strongest level of risk taking.
“The April numbers demonstrate a degree of comfort that US bank depositor stress will remain contained and not contribute to broader systemic risk,” he continues. “Nonetheless, sentiment in Asia slipped again, falling 2.6 to 89.3 on fading optimism of widespread gains from the reopening of the Chinese economy.”