State Street Global Markets released the results of the State Street Investor Confidence Index (ICI) for December 2020 which suggests that investors moved into a risk-on mood.

The Global Investor Confidence Index increased to 104.1, up 13.3 points from November’s revised reading of 90.8. Just to summarize the methodology State Street uses, 100 is viewed as neutral with a reading above that figure seeming risk on while those below are deemed risk-off.

 The North American ICI rose 15.9 points to 103.5, and the Asian ICI increased 17.4 points to 112.6. Meanwhile, the European ICI fell for the fourth straight month, down 4.6 points to 87.2.

The model measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional 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.

“As an overwhelming 2020 finally draws to a close, investors ended the year on more optimistic footing with the Global ICI recording its highest reading in over two years,” commented Rajeev Bhargava, head of Investor Behavior Research for State Street Associates. “The uptick in risk seeking behavior was largely driven by US and Asia investors as the release of COVID vaccines this month, prospects of a fresh stimulus package out of the US and post-election certainty are likely contributing to a more positive outlook on asset markets. However, as COVID cases continue to surge globally, we will need to see if the momentum persists into the new year as more data becomes available on the vaccines overall effectiveness, but certainly December’s reading of Global sentiment is a good supporting datapoint that we may be heading in the right direction.”