1 Jul 2009
State Street Global Markets, the investment research and trading arm of State Street Corporation, has released the results of the State Street Investor Confidence Index® for June 2009.
Global Investor Confidence rose by 7.0 points from a revised May reading of 108.5 to reach115.5. Confidence was up most strongly in Europe, where the benchmark rose 9.1 points to 95.0. Confidence also rose robustly among North American investors, climbing 6.2 points from 107.4 to 113.6. In Asia, risk appetite was down slightly, falling 1.3 points to 92.1 from May’s revised reading of 93.4. The changes from the prior-month numbers for both the Global Index and the North American Index were somewhat larger than usual due to the impact of the Memorial Day holiday on reporting in May.
Developed through State Street Global Markets’ research partnership, State Street Associates, by Ken Froot and Paul O’Connell, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling decisions of institutional investors. Unlike survey-based indices, the index is data-driven, and is based on a financial theory that assigns precise meaning to changes in investor risk appetite, or the willingness of investors to allocate their portfolios to equities. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.
Global Investor Confidence rose by 7.0 points from a revised May reading of 108.5 to reach115.5. Confidence was up most strongly in Europe, where the benchmark rose 9.1 points to 95.0. Confidence also rose robustly among North American investors, climbing 6.2 points from 107.4 to 113.6. In Asia, risk appetite was down slightly, falling 1.3 points to 92.1 from May’s revised reading of 93.4. The changes from the prior-month numbers for both the Global Index and the North American Index were somewhat larger than usual due to the impact of the Memorial Day holiday on reporting in May.
Developed through State Street Global Markets’ research partnership, State Street Associates, by Ken Froot and Paul O’Connell, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling decisions of institutional investors. Unlike survey-based indices, the index is data-driven, and is based on a financial theory that assigns precise meaning to changes in investor risk appetite, or the willingness of investors to allocate their portfolios to equities. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.
“June marks the third consecutive month that the Global Index has remained above the neutral level of 100, the level above which institutional investors are increasing their allocations to risky assets,” said Froot. “Notwithstanding some concerns around the long-run sustainability of fiscal positions and the impact of quantitative easing on inflation, institutional investors continue to endorse the long-run outlook.”
“Institutional investor confidence has consistently lead measures of consumer confidence since the onset of the financial crisis in mid-2007 by one to two months, and it continues to do so now,” added O’Connell. “For example, North American Investor Confidence bottomed in December, while the Conference Board’s measure of Consumer Confidence did not turn up until February. Likewise in Europe, the European Investor Confidence Index has lead the European Commission’s Economic Sentiment Indicator through the cycle. This quarter’s increase of 21.3 points is the best showing for the European Index since the third quarter of 2006.”
