Investor confidence is waning on a global basis, according to the latest reading of the State Street Global Markets Investor Confidence Index.
Developed by Harvard University professor Kenneth Froot and Paul O’Connell of State Street Associates, the index measures investor confidence by analyzing the buying and selling patterns of institutional investors. The greater the allocation to equities, the higher the confidence reading. A reading of 100 is neutral.
Globally, confidence fell 3.3 points to 100.9 in January. The risk appetite of North American institutional investors fell to 99.5, from 103.1 in December. In Europe, confidence decreased 3.9 points to 93.5, while Asia saw a 5.4-point decline to 97.5.
“Institutional investors reverted to a more cautious stance this month, balancing improved prospects for global growth against what has been a relatively rapid run-up in prices,” Froot says. “With world equity prices up 6.9% over three months and 20% over six months, valuations have moved up a reasonable amount, prompting some in the institutional community to adopt a ‘wait-and-see’ stance. It remains to be seen whether improved macroeconomic data from the U.S. and policy actions with respect to peripheral European debt will prompt an early reassessment of this stance.”