The State Street Investor Confidence Index (ICI) showed an increase in confidence of 6.6 points in May.
State Street’s Global ICI increased to 79.5 in May, up from 72.9 the previous month. The results found that confidence among North American and European investors improved, with the North American ICI rising from 71.3 to 76.7, and the European ICI rising from 86.6 to 92.5. By contrast, the Asia ICI dropped by 4.2 points to 88.4.
The ICI measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The greater the percentage allocation to equities, the higher the score on the index, with a reading of 100 serving as the neutral point, where investors are neither increasing nor decreasing their long-term allocations to risky assets.
Marvin Loh, senior global macro strategist at State Street Global Markets comments: “Investors that embraced ‘sell in May and go away’ rested easier this month, as risk assets are experiencing their weakest performance of the year. Driven by trade and growth concerns, global equities are set to close broadly in the red for the first time this year. Yields have all but collapsed, with developed market sovereign interest rates falling to their lowest levels in years. The overall hesitancy that we have seen from investors all year, reflects many of the concerns that emerged this month.”
Kenneth Froot, co-developer of the ICI at State Street Associates, the bank’s research and advisory services business, adds: “Trade war and Brexit-related uncertainty dominated this month’s headlines. Institutional investors have been wary, and with potential supply-chain disruptions and concerns about rising protectionism it is understandable that sentiment remains anchored in the risk-averse territory. However, while the low level of the index points to risk-off behavior over the last few months, the solid uptick this month indicates some investors may be moving back in to buy the dip.”