State Street’s Global Investor Confidence Index (ICI) dipped for the first time in months during October as European investors moved to a ‘risk-off’ approach.
The ICI’s methodology has 100 as neutral with any reading above that being risk-on and the opposite is true for readings below it. The Global ICI was 80.1, down 3.8 points from September’s revised reading of 83.9.
The drop in investor confidence was primarily driven by a 17.4 drop in European ICI to 92.8, in previous months it had been registering over 100 and well into risk-on mode.
The North American ICI fell a more modest 2.0 points to 76.8. Meanwhile Asian ICI increased to 91.7 from 84.5.
The accuracy of State Street’s model is perhaps heightened by the fact it measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.
Rajeev Bhargava, head of Investor Behaviour Research, State Street Associates said: “Aggregate risk appetite slipped in October, and the decline in sentiment was seemingly driven by US and European investors, as a second wave COVID infections rose sharply and simultaneously across regions, again elevating concerns about growth.
“Interestingly, Asia witnessed a bounce in investor appetite, possibly reflecting the regions current ability to contain the virus locally. However, combined with the uncertainly over the upcoming US election, the long-term trend for global investor sentiment remains unclear. It will be important to see if risk appetite steadies regionally on the outcome of the election or whether the rise in COVID infections we are seeing remains a driving force that will continue to impact investors over the next several weeks.”