Index reveals institutional investor caution

Institutional investor confidence declined in December, led by North American investors, according to the latest State Street Investor Confidence Index (ICI).

The index, released in late December, revealed a decline of 1.5 points to 94.8 driven by a 6.2 point drop in the North American ICI to 94.9 and a 2.8 point fall in the Asian ICI to 94.8.

By comparison, the European ICI rose 16 points to 96.9. 

Commenting on the index, State Street Global markets senior managing director and head of global macro strategy, Michael Metcalfe said that after peaking in July last year, investor confidence had fallen for five consecutive months; the last three of which had seen investors reduce their holdings of risky assets.

“While the broader economic outlook appears increasingly rosy, as captured by measures of consumer and business confidence, the more cautious nature of investors hints at a concern that financial markets may have already discounted much of the good news,” he said.

One of the founders of the index, Ken Froot said that in Europe, healthy growth and continued European Central Bank (ECB) asset purchases may have helped to boost investor confidence.

“Although the index remains below 100, it seems that European-based investors are becoming less concerned that political risks could derail the strong economic performance across the region,” he said.