North America leading fall in institutional investor confidence

The State Street Investor Confidence Index (ICI) for September declined 5.7 points from August’s reading to 88.3, with the fall led by decreasing confidence and risk appetite among North American investors.

The North American ICI fell from 90 points in August to 84.5 this month, with its Asian counterpart also declining 2.5 points to 100. Meanwhile, the European ICI jumped one point to hit 101.

Elevated stock valuations and concerns about a slowdown in corporate earnings growth contributed to risk aversion in North America, with the escalation of the trade dispute between the US and China also being flagged by State Street as a potential cause of declining confidence.

Senior managing director at State Street Global Markets, Michael Metcalfe, said that although US equity markets were continuing to break records, institutional investors were still becoming increasingly cautious.

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“Institutional investors have reduced their holdings of risky assets for two months in a row and have taken our investor confidence index to its lowest level in more than five years. The implication would appear to be that investors think, for the moment at least, all the good news is in the price,” Metcalfe said.

The State Street ICI was measured on quantitative analysis of institutional investors’ buying and selling to determine investor confidence or risk appetite, with a reading of 100 being the neutral point at which investors are not changing their long-term allocations to risky assets.