Investor Confidence Rises in February

State Street’s Global Investor Confidence Index (ICI) increased to 77.5, up 1.1 points from January’s revised reading of 76.4. The increase was led by a 5.8 point rise in Asian ICI to 98.2, as well as a 4.1 point increase in European ICI to 106.4. North American ICI, meanwhile, fell 0.3 points to 72.8.

The 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. 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 bank says the index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.

“Investor confidence continued to consolidate, albeit with an overall defensive tilt as reflected in the global ICI firming to 77.5, but remaining well below 100,” says Marvin Loh, senior macro strategist at State Street Global Markets. “Once again, North America had the weakest regional reading at 72.8, near the lowest levels seen since before the pandemic. The weak results follow a string of stronger than expected U.S. data that has pushed the market to once again raise its expectations for Fed rate hikes.

“The overall improvement in global risk was therefore led by better readings in the Asian and European ICI,” he explains “Continued optimism regarding the pace and progress of China’s economic re-opening process contributed to regional optimism, while stable energy prices and a relatively mild winter in Europe buoyed investor sentiment near the one-year anniversary of the war.”