Investor sentiment declines, although Europe more optimistic

Businessman graph downInvestors across the globe are losing confidence in markets, according to the April 2016 State Street Investor Confidence Index.

The global investor confidence index (ICI) fell by 5.7 points to 109.1, primarily driven by a decrease in the North American ICI from 123.7 to 115. The Asian ICI fell 4.2 points to 107.8, but the European ICI dropped the least, from 95.8 to 95.3.

The universal fall in confidence is in stark contrast to last month’s findings, which indicated investors in every region have an increased enthusiasm for risk. This increase was attributed to the oil price rally and subsiding market volatility, and followed one of the worst starts to the year since the index was launched.

State Street manages assets of $2.45 trillion (€2.16 trillion).

The index, which was developed by Kenneth Froot and Paul O’Connell of State Street Associates, measures investor confidence and risk appetite quantitatively by analysing the equity buying and selling patterns of institutional investors. A score of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their allocations.

Froot attributes the moderate fall to stretched valuations following the recent rebound in the fortunes of equities and commodities, and “disappointing” corporate guidance. Absent further central bank action, he feels investors will look to improving fundamentals to sustain a rally going forward.

©2016 funds europe