Worries about new virus variants and the sluggish vaccine rollout in the European Union made investors nervous in much of the world, although the mood in North America was not affected as severely as in other parts of the world.
Investors’ risk appetite fell sharply in February as sluggish European vaccine rollouts and concerns about new virus variants blunted sentiment, according to a global measure of people’s actual buying and selling habits in financial markets.
The Global Investor Confidence Index, produced by State Street Global Markets, fell to 91.9, down 8.9 points from January’s revised reading of 100.8. The decline was driven by large drops in the European and Asian indices, which fell by 16.6 points to 78.1 and 17.5 points to 98.2, respectively. The North American ICI also fell, but by a smaller magnitude, falling 2.8 points to 93.3.
The Investor Confidence 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.
“The slower than expected vaccine rollout combined with the added complexity of new, potentially more infectious variants are elevating growth fears, particularly in Europe where official growth forecasts have recently been lowered,” Rajeev Bhargava, head of Investor Behavior Research, State Street Associates, said. “And while Asia continues to experience a rebound in activity on the back of strong exports, concerns over tightening credit conditions out of China may have dampened enthusiasm for the region, evident by the much weaker sentiment expressed by institutions this month.”