State Street Global Exchange released the results of the State Street Investor Confidence Index (ICI) for March 2017. The Global ICI increased to 95.4, up 4.2 points from February’s revised reading of 91.2. European investors confidence improved with the European ICI increasing 11.9 points to 95, up from February’s revised reading of 83.1. The Asian ICI also rose from 104.3 to 109.6. Meanwhile, the North American ICI declined by 0.3 points from 91.9 to 91.6.
The ICI was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business. It measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.
The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.
“In the US, significant scepticism remains given the strong run in stocks year-to-date,” commented Ken Froot. “Exiting historically low rates is a policy withdrawal investors have not experienced before; therefore it is natural that such an extreme policy is being questioned.”
“The pull back in European investor confidence last month reversed course in March, with the index gaining 11.9 points,” commented Rajeev Bhargava, managing director and head of Investor Behaviour Research, at State Street Associates. “Easing of political tensions in the region post the Dutch elections, as well as sustained economic momentum on the back of a series of positive economic surprises, seems to have contributed to the more constructive tone from investors.”