While the Global Investor Confidence Index (ICI) increased to 102.1 in January, a jump of 6.4 points from December’s revised reading of 95.7, it was confidence in Europe which saw the biggest jump in the month according to State Street Associates.
The ICI measures investor confidence or risk appetite quantitatively, by analysing the actual buying and selling patterns of institution investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence.
A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. In January, the European ICI rose 16.0 points to 113.4, the Asian ICI increased by 6.1 to 100.8, while the North American ICI was up 1.7 points to 97.2.
“Global equities have seen the best start of a new year in three decades,” said Kenneth Froot, who developed the index at State Street Associates with Paul O’Connell, commenting on January’s findings.
“Stocks are hitting all-time highs, earnings forecasts are rising, and positive earnings surprises have outweighed disappointments across global markets. Given this backdrop, it is not surprising that global institutional investor confidence is showing signs of optimism.”
“We seem to be witnessing a sense of confidence in Europe after two years of subdued risk appetite,” added Rajeev Bhargava, managing director and head of Investor Behavior Research at State Street Associates.
“Improving European economic growth, subsiding political uncertainties, and the European Central Bank’s accommodative policies are possibly feeding into stronger enthusiasm.”
