Investors drew in their horns slightly at the end of 2017, an index of their buying and selling activity shows.

A measure of investment sentiment from around the world dropped in December, led by declines in Asia and North America, with only Europe bucking the trend, figures from State Street, the US financial group, said.

The organization issued its State Street Investor Confidence Index® (ICI) for last month. The Global Investor Confidence Index fell to 94.8, down 1.5 points from November’s revised reading of 96.3. The fall in sentiment was driven by a 6.2 point drop in the North American ICI to 94.9 and a 2.8 point fall in the Asian ICI to 94.8. However, the European ICI rose 16 points to 96.9.

“After peaking in July this year, investor confidence has now fallen for five consecutive months; the last three of which have seen investors reduce their holdings of risky assets (an index reading below 100),” Michael Metcalfe, senior managing director and head of Global Macro Strategy, State Street Global Markets, said. 

The 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. 

“After peaking in July this year, investor confidence has now fallen for five consecutive months; the last three of which have seen investors reduce their holdings of risky assets (an index reading below 100),” Metcalfe said. “While the broader economic outlook appears increasingly rosy, as captured by measures of consumer and business confidence, the more cautious nature of investors hints at a concern that financial markets may have already discounted much of the good news,” he continued. 

“In Europe, healthy growth and continued ECB asset purchases may have helped to boost investor confidence,” Froot said. “Although the index remains below 100, it seems that European-based investors are becoming less concerned that political risks could derail the strong economic performance across the region,” he added.