Global Investor Confidence Breaks Above 100 Points For First Time In 10 Months - State Street

Robbie Lawther

1 June 2017

Despite this being a time of major uncertainty in the world, with the effects of Britain’s impending departure from the European Union and Donald Trump's reign as President of the US, consumer confidence is on the rise, according to the State Street Investor Confidence Index.

Global investor confidence for May 2017 rose by 5.1 points to 102.5 from April’s reading of 97.4. This is the first time the Investor Confidence Global Index has stood above 100 points since June 2016. A reading above 100 suggests optimism, and under that, pessimism.

The index, which is developed by Kenneth Froot and Paul O’Connell, measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.

The North American ICI logged the biggest surge in confidence from 95.1 in April 2017 to 104.1 in May. The European ICI only marginally increased by 0.4 points to 96.9 from 96.2.

However, there was a shrink in investor confidence reported in the Asian ICI, which has decreased for the second consecutive month, as the index logged a fall from 104.6 to 101.1.

“After 10 consecutive months of readings below 100, Global investor confidence is finally picking up steam,” said Rajeev Bhargava, managing director and head of investor behavior research, State Street Associates. “Markets continue to anticipate a very gradual course for the Federal Reserve rate hikes and with hopes for increased infrastructure spending and tax reforms, the North American ICI readings are resonating with the uptick in risk appetite.”

“Looking regionally, ICI numbers in Europe are below the neutral 100-level mark, as investors take a pause to reflect on elevated valuations in the region following the strong run year-to-date,” commented Froot. “In contrast, Asian ICI has remained in a risk-on environment, perhaps reflecting the superior earnings growth in the region, as well as the falling risk premium in China.”