Investor confidence slumps in August

The State Street Global Markets investor confidence index declined to 89.6 in August - down 12.9 points from July's 102.5.

The index is constructed so that a reading of 100 is neutral - that is, when the index is at 100 investors are neither increasing or decreasing their allocations to risky assets. Additionally, the index is based on actual trades (as opposed to the opinions) of institutional investors.

Breaking the index down within regions, the US reading fell to 88.6 from a July level of 102.5; the European index declined to 90.5 from 95.1; and the Asian reading fell to 95.2 from 95.8.

The developer of the State Street confidence index, Harvard professor Kenneth Froot, said recent stock market volatility, concerns about global economic growth, the US sovereign debt downgrade, and worries about Europe had all contributed to the decline in investor sentiment.

"Looking regionally, it is clear that the setbacks this month were felt most strongly by US-based institutional investors," said the co-founder of the index, State Street Associates' Paul O'Connell.

"Typically, a double-digit decline only occurs once a year or so. To keep things in perspective, it should be noted that this month's 12.9 point decline is not as severe as the 21.7 point decline registered among North American investors in October 2008, and institutional investors elsewhere are somewhat more optimistic, especially in Asia," O'Connell added.