North American Investor Confidence Declines

The State Street Investor Confidence Index (ICI) for September 2012 found that the Global ICI fell from August’s revised reading of 91 to 86.9. North American investor confidence fell 3.2 points from August’s reading of 84.3 to end at 81.1. Asian investors followed suit, with the Asian ICI declining 5.6 points to 87.6. European investors were the exception, with an increase in risk appetite leading the European ICI up by 4 points from 101 in August to 105 in September.

“This month’s decline in global investor confidence is the result of diminished risk appetite among both North American and Asian investors,” said Kenneth Froot, a Harvard University professor who developed the Investor Confidence Index alongside Paul O’Connell of State Street Associates. “While diminished growth expectations for Asia account for some of the reticence in that region, the third consecutive decline in confidence among North American investors is more puzzling, especially given recent announcements by monetary policy makers on both sides of the Atlantic. It is clear that in their actual portfolios, institutional investors continue to exhibit caution given the global growth backdrop.”

As with last month, emerging markets continue to attract some positive inflows, O’Connell added.

The State Street Investor Confidence Index 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—the level at which investors are neither increasing nor decreasing their allocations to risky assets.