Investor confidence falls slightly: State Street

Global investor confidence fell slightly in April, according to the latest reading of the State Street Investor Confidence Index. The survey found confidence declined 0.3 points from a revised March reading of 97.3 to 97.0 in April.

North American investor confidence declined by 3.9 points to 98.4 from March’s revised reading of 102.3. In other regions, investors were more upbeat. Sentiment among Asian investors increased 2.7 points to 99.2 from the March reading of 96.5. In Europe, investor confidence bounced off its recent lows, rising 6.3 points from the March level of 66.9 to settle at 73.2.

The State Street Investor Confidence Index was developed by Harvard University professor Kenneth Froot, and Paul O’Connell of State Street Associates. It measures investor confidence or risk appetite quantitatively by analyzing 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 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.

“We see some generalized evidence that institutional investors have shifted into a neutral gear with the Global, North American and Asian Confidence Indices all hovering in the neighborhood of 100,” said Froot. “Recent signals suggesting that US growth expectations for the first quarter may need to be trimmed, coupled with ongoing concerns about the resolution of fiscal deficits in both the US and Europe, have dampened enthusiasm for further equity risk allocations.”

“Looking regionally, we see that inflows into emerging markets have tapered off to a degree from the robust levels observed over recent months,” added O’Connell. “Though flows into emerging markets, particularly Emerging Asia, remain positive, they are no longer sufficient to outweigh the modest but persistent selling of developed markets equities that we have observed since last summer.”

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.