Institutional investors cautious on Trump, Brexit

Institutional investors appear to be taking their time in assessing the implications of a Trump presidency in the US and the continuing fall-out from Brexit, according to analysis attaching to the latest State Street investor confidence index.

The November index, released this week, saw the global index decrease by 0.3 points to 98.9 from October's revised reading of 99.2 points with the decline being driven by a 4.6 point decrease in the Asian index to 116.1 and a 2.6-point decline in the European index to 86.5.

The North American index rose slightly from 95.6 to 95.7.

Commenting on the outcome, State Street Associates' Dr Ken Froot said that global markets continued to decipher the economic and political effects of a Trump presidency on the heels of Brexit, the decline in the global index suggested that institutional investors remained reluctant to embrace market reactions.

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"It is yet to be seen whether the stress deriving from upcoming events, such as the OPEC [organization of the Petroleum Exporting Countries] meeting in November and the ECB [European Central Bank] and FOMC [Federal Open Market Committee] meetings in December, will have any additional impact to the risk sentiment before year-end," he said.

State Street Global Exchange executive vice-president and chief innovation officer, Jessica Donohoe pointed to the uncertainties generated by the US presidential election.

"Looking at investor confidence regionally, the setbacks in the index this month were felt most strongly by Asian-based institutional investors," she said."Trump's victory has clearly exacerbated anti-globalisation jitters."

"Moreover, confidence in Europe further declined to the mid-eighties, a relatively low level, as the UK's exit from the European Union and Italian political risk remain a source of major concerns," Donohoe said.