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Investor confidence increases in November after US election result

News Team, 26/11/2020

Worldwide confidence in investing increased in November following the results of the US election and the announcement of potential vaccines for Covid-19, according to newly published results from State Street’s Global Investor Confidence Index.

After a dip in October, global investor confidence has increased to 90.7, up 10.6 points from last month’s revised reading of 80.1. This has been primarily driven by a 10.6 point jump in the North American investor confidence index (ICI) to 87.4.

Elsewhere, the Asian ICI increased to 95.1 from 91.8. By contrast, the European ICI declined for the second straight month, down 1.8 points to 92.0.

The results, while positive, suggest that investors remain more inclined to decrease allocations to risky assets, in an investment climate that remains deeply volatile.

The Investor Confidence Index measures investor confidence and risk appetite quantitatively by assessing the buying and selling patterns of institutional investors. The ICI’s methodology has 100 as neutral, with any reading above the number being considered as ‘risk-on’, and any result below 100 being considered as ‘risk-off’. Currently, the major markets remain below 100 in the indexes.

Commenting on the results, Marvin Loh, senior macro strategist at State Street, said“The gains were led primarily by an improving outlook in North America, which recorded its highest readings of the year on the back of the conclusion of the U.S. election process and positive news regaRding a COVID-19 vaccine. Equity valuations reached new highs, with the Dow Jones poised to record its strongest monthly return of the year as value outperformed growth.”

Outlining the gloomier picture in other markets, he added: “In contrast, risk appetite fell to its lowest levels of the year in Europe, as surging virus cases resulted in another round of lockdowns and restrictions. Ongoing Brexit negotiations and an EU budget impasse further sapped investor confidence, although most European bourses are set to report double-digit gains for the month.”

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