While the economic and financial news was challenging in March, it is possible that the US government's actions to contain fallout from the Silicon Valley Bank collapse may have helped underpin sentiment, authors of the report said.
A global measure of the actual buying and selling habits of investors shows that they grew more confident in March compared with their stance in February, possibly encouraged by moves in the US to backstop depositors in stricken Silicon Valley Bank.
The Global Investor Confidence Index, issued by State Street this week, increased to 81.4, up 3.8 points from February’s revised reading of 77.6. The increase was led by an 11.0 point rise in the European ICI to 117.5, along with a smaller 0.9 point increase in the North American ICI to 73.9. The Asian ICI, meanwhile, fell 6.3 points to 91.9.
“In the face of heightened stress in the US banking sector, institutional investors continued to take a defensive stance with the Global ICI posting at 81.4 in March, well under the risk neutral level of 100,” Rajeev Bhargava, head of Investor Behavior Research, State Street Associates, said. “While the aggregate sentiment remained weak, it is important to report that investor confidence did not deteriorate further in March but actually firmed a touch, with our global measure gaining around 4 points.”
“Indeed, the North American ICI remained steady through March albeit at weak levels, possibly supported by talks that the FDIC will extend insurance to all deposits, and in Europe investor optimism climbed sharply higher. With Asia being the only region that witnessed a decline is sentiment, the behaviour of institutions in March demonstrated some level of resilience to the recent bout of market volatility,” Bhargava said.
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.