In a clear indication that the ongoing US-China trade war and gloom about the global economy are having an impact on investor sentiment, State Street’s Global Investor Confidence Index (ICI) fell in August by 8.7 points from July’s 84.6 to 75.9, its lowest level for four months.
The index assigns changes in investor risk appetite: the greater the percentage allocation to equities, the higher the risk appetite or confidence. It differs from survey-style measurements by basing its analysis on actual trades – as opposed to views – of institutional investors.
Overall, investor confidence across all regions fell, with the ICI in North America decreasing from 80.3 to 72.5 points, the European ICI dropping from 98.6 to 89 points and the Asian ICI slipping from 91.8 to 89.2.
Rajeev Bhargava, managing director and head of investor behavior research at State Street Associates, the research arm of State Street Global Markets, says in a statement: ‘In August, institutional investor sentiment declined once more against a backdrop of downside risks to the economy, increased political uncertainty in Italy and the possibility of a hard Brexit.
‘Monetary and trade policy uncertainty is reducing risk appetite, and investors are watching for changes in interest rate expectations following this year’s Federal Reserve conference in Jackson Hole.’
The ICI was developed by Kenneth Froot and Paul O’Connell at State Street Associates and measures investor confidence quantitatively by analyzing the buying and selling trends of institutional investors.
Froot adds: ‘This month’s investor confidence index results reflect investors’ growing concerns about the global economic slowdown and widespread declines in global manufacturing as the trade war between the world’s two largest economies continues to escalate.
‘Investors are expressing renewed risk aversion in the midst of heightened volatility in the financial markets and a renewed inversion of the treasury yield curve.’