The confidence level shown in October was strong, proving hard to repeat in November. A key for the future is whether investors will be able to overlook worries about inflation in order to sustain confidence in markets, State Street said.

A global barometer of investor confidence from State Street, an organisation which tracks the buying and selling habits of market players, dropped in November from the previous strong month.

In November the Global Investor Confidence Index dipped to 110.5, a fall of 3.6 points from October’s revised reading of 114.1. The fall was led by the North American ICI. The Asian ICI rose by a more modest 4.8 points to 108.1 and the European ICI fell by 1.4 points to 95.3.

The data, which comes from State Street Global Markets, is one of the few measures that actually tracks what investors do with their wealth each month, contrasting with polls of their opinions. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite/confidence is. A reading of 100 is neutral.

“Investor sentiment remained near its three-year high in November, although the Global ICI eased off the strong levels recorded last month,” Marvin Loh, global macro strategist, State Street Global Markets, said. “The overall positive tone in risk assets pushed global equity bourses to multi-year highs, led by North America, with US equity investors looking past the start of Fed tapering, higher inflation readings and more aggressive rate hike expectations.”

“Investors’ willingness to look through surging inflation will be key to maintaining overall investor confidence that has emerged globally this year,” Loh added.

Earlier this week, economists at Credit Suisse described how they expect inflation to remain elevated in 2022, bringing a return to more normal monetary policy, saying that equities and real assets remained the most attractive places to be, contrasting with government bonds and most – if not all – forms of fixed income.