State Street Global Exchange today released the results of the State Street Investor Confidence Index® (ICI) for February 2016.
The Global ICI decreased to 106.5, down 2.2 points from January’s revised reading of 108.7. The decline in sentiment was driven by a decrease in the European ICI from 103.4 to 90.2. In contrast, the Asian ICI increased by 9.2 points to 111.9 while the North American ICI rose from 108.9 to 109.3.
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 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 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.
“February was an interesting month that saw swings in investor sentiment fueled by high volatility in oil prices as well as dovish signs from central banks in Europe and Japan,” commented Froot. “Moving forward, all eyes will be focused on the European Central Bank and the Federal Reserve’s March meetings as the global growth outlook remains a key concern for investors.”
“The narrative surrounding risk aversion seen so far in 2016 has focused on the weakness of global growth, the risks in China and the knock-on impact of lower energy prices. However, the regional breakdown of our investor confidence index this month reveals a rather different set of concerns, with confidence rising in Asia but collapsing in Europe,” added Michael Metcalfe, senior managing director and head of Global Macro Strategy, State Street Global Markets. “The 13-point fall in the confidence of European investors was the sharpest in 16 months. With banking and government credit spreads under pressure once again, this decline in European confidence highlights the pressing need for additional policy measures in the region.”
