Wed, Nov 26, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

State Street's investor confidence index up 0.8 points in July to 107.6

Wednesday, July 31, 2013
Opalesque Industry Update - The State Street Global Investor Confidence Index rose very slightly to 107.6 in July, up 0.8 points from June’s revised reading of 106.8. The increase was slight, and was largely driven by an increase in risk appetite among Asian investors, with their risk appetite jumping from 89.3 to 100.8, and, to a lesser extent by an increase in risk appetite among European investors, with a corresponding increase from 98.2 to 105.7. North American investors by contrast became somewhat more conservative, showing a decline (albeit very small) from 114 to 113.7.

The State Street Investor Confidence Index was developed by Harvard University professor Kenneth Froot and Paul O’Connell of State Street Associates. It 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. 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. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.

“This month, North American investors are more concerned with rapid run ups in stocks and interest rates,” commented Froot. Last month’s risk-on view was that the interest rate increase doesn’t portend higher inflation nor higher growth - that it’s just a reduction in the rate-distortion caused by the Fed’s QEIII. Investors are back to a more realistic concern that, distortion or not, higher nominal and real rates translate into less credit extension, less leverage, and slower growth. This has been underscored by the results of the earnings season, which have been mixed. It’s also a reminder that the previously high rates of forecasted earnings growth are, at this point, in the unlikely positive tail.”

“The more decisive part of this month’s story is what is happening with European and Asian investors,” said O’Connell. “There we see that there is light at the end of the tunnel of adjustment to slower Chinese, Japanese, and European growth. They seem to be saying that, in spite of higher interest rates globally, the developed-countries’ monetary authorities are most likely to act to reduce the risk of economic growth, responding with flexibility and stimulus on the downside and using the opportunity for faster growth to tighten and slim their balance sheets. As a result, the range of real economic growth outcomes is actually more limited than it has been in a long time.”

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - George Soros puts $500m of his money on Bill Gross, Soros, Paulson backed Hispania Activos mulls Realia takeover, Ex-Credit Suisse trader’s hedge fund sees yen shorts as crowded, Hedge hunters double default-swaps as views split, Large hedge fund positions come under pressure, Vikram Pandit's fund picks 50% stake in JM Financial's realty lending arm for $87m[more]

    George Soros puts $500m of his money on Bill Gross From WSJ.com: Before Bill Gross was fully settled in at his new firm, Janus Capital Group Inc., he received an unlikely visit from the chief investment officer of famed investor George Soros ’s firm, according to a person familiar with t

  2. Legal - Hedge fund manager fights £8m tax tribunal ruling[more]

    From FT.com: A hedge fund manager who may have to repay £8m in tax is trying to overturn a tribunal ruling that found he had attempted to shelter millions in an avoidance scheme. Patrick Degorce, chief investment officer at Theleme Partners, lost a tax tribunal case last year. HM Revenue & Customs c

  3. Europe - Hedge funds face exit tax as Iceland central bank discusses plan[more]

    From Bloomberg.com: Hedge funds and other creditors with claims against Iceland’s failed banks face an exit tax as the island looks for ways to unwind capital controls without hurting the economy. The government targets having a plan it can present by year-end that would map out how Iceland will sca

  4. Opalesque Exclusive: Risk management emerges as a competitive focus area for hedge funds[more]

    Bailey McCann, Opalesque New York: Risk management has always been a core component of any trading strategy, as well as a critical part of business management. However, as macreconomic weakness persists, and alpha becomes increasingly hard to generate, risk management as emerged as a more promin

  5. Gross: Inflation is required to pay for prior inflation[more]

    Benedicte Gravrand, Opalesque Geneva: As inflation rises, every dollar will buy a smaller percentage of a good. While deflation will mean a decrease in the general price level of goods and services. These two economic conditions are both in the waiting room. The consensus would like the former to