The Global Investor Confidence Index decreased to 70.2, down 9.4 points from December’s revised reading of 79.6. Confidence among North American investors worsened, with the North American ICI decreasing from 74.5 to 66.8. The European ICI decreased by 2.6 points to 90.3 and the Asia ICI decreased by 10.3 points to 100.2.
The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s 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 ininvestor 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.
“As we progress into 2019, our global Investor Confidence Index reflects a warp-speed deterioration in confidence. While confidence itself is not necessarily at an all time low, this month’s unprecedented low level reflects the extraordinary rate of retreat hastily beaten by professional managers. Noteworthy is that this retreat has continued through the third week in January, even as stock prices had over January partially recovered from Christmas-eve lows. Clearly, managers are voicing persistent concerns around growth globally and in the nowhere-else-to-go tightening trajectories of US monetary and fiscal policies,” commented Kenneth Froot.
“What is striking again this month is that while the market narrative focuses on the deteriorating global environment, whether it be weaker data in China or rising recession risks in Europe, investor confidence is deteriorating faster in the US than it is in other regions. This panic, and it is no longer an exaggeration to use this term, is as much about bursting a bubble in US expectations, as it is about weakness in fundamentals outside of the US,” commented Michael Metcalfe, senior managing director and head of Global Macro Strategy, State Street Global Markets.