Investor Confidence Falls in October by 2.3 Points to 114.3

State Street Global Exchange released the results of the State Street Investor Confidence Index® (ICI) for October 2015

The Global ICI decreased to 114.3, down 2.3 points from September’s revised reading of 116.6. The decline in sentiment was driven by a decrease in the North American ICI from 133.2 to 125.5 along with the European ICI falling 5.8 points to 89.9. By contrast, the Asia ICI rose by 13.2 points to 111.0.

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.

“Despite the ongoing uncertainty about the global outlook and dovish comments from the Fed, global institutional investor confidence remains largely positive,” commented Ken Froot. “Meanwhile, the increasingly accommodative stance taken by policy makers globally and hopes for state-owned enterprise reforms in China have had a large impact on Asian investors, boosting risk appetite by 13.2 points. This is the first time that the Asia ICI has ascended above the key 100 threshold this year, signaling a more ‘risk on’ climate.”

“The drop in European investor sentiment is a worrying sign in light of some of the fundamental data we have seen across the currency union of late,” added Timothy Graf, head of Macro Strategy for State Street Global Markets in EMEA. “With inflation not recovering in the Eurozone, recent central bank hints at further easing may need to become more concrete before we see a significant increase in confidence.”