State Street’s Investor Confidence Index (ICI) showed a 0.9 point drop globally to 79.2 for the month of October.
The North American ICI saw a 4.3 point drop to 67.6, the Asia ICI had a 1.5 point drop to 85.6, while Europe’s ICI increased for the second month in row from 107.4 to 132.9.
Marvin Loh, State Street Global Markets senior macro strategist, said despite the US stock market reaching new highs, US investor confidence declined.
“Despite a more accommodative Fed, deepening geopolitical risks coupled with historically rich equity valuations in the US appear to be having a detrimental effect on investor sentiment right now,” Loh said.
Kenneth Froot, one of the developers of the index, said European investor confidence increased after positive developments in Brexit negotiations and trade war talks sparked large-scale equity purchases in the region.
“These events have prompted institutions to reduce cash levels; purchasing both equities to capitalise on pro-risk developments, and bonds to capitalise on an increase in yields,” Froot said.
The index was developed to measure investor confidence or risk appetite quantitatively by analysing the buying and selling patterns of institutional investors.
The greater the percentage allocation to equities, the higher risk appetite or confidence; a score of 100 was neutral.