State Street shows North American investor confidence rising

US congressReduced expectations of a rate hike by the US Federal Reserve partly explain increased investor confidence by American institutions, according to State Street.

State Street’s monthly Investor Confidence Index (ICI) increased by seven points in May over April for North American investors – but the European index fell by 5.5 points in the same period.

The ICI measures investor confidence or risk appetite by analysing the buying and selling patterns of institutional investors rather than canvassing investor opinions.

Kenneth Froot, one of the developers of the ICI, states that a lower dollar, stabilising energy prices, and reduced expectations of an imminent rate hike provided tail winds to North America sentiment.

“Investors must now wait and see whether a rebound in second quarter growth will lead to more hawkish statements from the Federal Reserve,” he adds.

Jessica Donohue, chief innovative officer at State Street Global Exchange, says that a rising euro, increased sovereign yields, and the continued Greek debt crisis helped contribute to the decline in European investor confidence.

However, she adds that the front-loading of sovereign bond purchases by the European Central Bank before the summer months may help reverse the recent decline in sentiment.

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