Investor confidence decline “comparable in severity” to crisis

Waning confidence among US institutional investors pulled down a global index of investor risk-taking, despite more positive sentiment in Europe and Asia.

State Street’s Global Investor Confidence Index showed an overall decrease of 2.8 points in December to 79.7. Any reading below 100 suggests the extent to which investors are taking less risk.

European investor confidence – although still below 100 – showed an increase of 2.1 points to 90.4, while sentiment among Asian institutions was firmly in ‘risk-on’ mode, with an 8.7-point jump taking the Asian regional index to 110.6.

It was in North America where sentiment fell. The regional index dropped 9.2 points to 74.1.

A State Street expert warned that the decline in the overall index had echoes of investor confidence readings during the global financial crisis. 

Kenneth Froot, who co-developed the index, said: “Differences between the Fed and market observers over the importance of quantitative tightening exacerbated the anxiety for markets [that were] already on edge from trade disputes, Chinese growth and a slowdown in corporate earnings growth.

“In fact, the global [Investor Confidence Index’s] low level in December reveals a recent decline that is comparable in severity to what occurred during the global financial crisis.” 

Global markets faced sharp declines in the fourth quarter of 2018, continuing to dent investor confidence, State Street said.

©2019 funds europe

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