The State Street barometer of confidence is distinctive in that it looks at the actual transactions investors make.
An index showing the actual buying and selling habits of the world’s investors showed that they grew more confident in July as vaccination progress helped sentiment, although Asia lagged other regions, according to figures from State Street.
State Street’s Global Investor Confidence Index increased to 100.6, a rise of 4.0 points from June’s revised reading of 96.6. The increase in confidence was primarily driven by a 9.3 point jump in the North America ICI to 105.1. The European ICI also increased slightly, rising 1.8 points to 92.8. Meanwhile, the Asian ICI continued its decline from June, falling 4.8 points to 87.0.
The index measures investor confidence or risk appetite quantitatively by analysing what institutional investors do. 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.
“Risk appetite improved in July as the Global ICI ticked higher on confidence of continued reopening tailwinds,” Marvin Loh, senior macro strategist at State Street Global Markets, said. “US investor sentiment reversed all of last month’s weakness with longer-term inflation expectations stabilising despite higher-than-expected current price readings. Interest rates also fell by their widest margins in over a year, which kept financial conditions supportive of risk assets,” he continued.
“In contrast, however, Asian investor confidence retreated to its lowest levels in a year, likely due to the region’s vaccination levels lagging much of the developed markets and growth concerns starting to emerge in China. And, of course, we will need to keep an eye out moving into the fall if Delta variant concerns continue to grow,” Loh added.