Mon, Jul 28, 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. Events – AIMA Australian Hedge Fund Forum, Sept. 16, Sydney[more]

    AIMA Australia invite you to join us at our annual Hedge Fund Forum on Tuesday 16th September 2014 at the Sofitel Sydney Wentworth. The AIMA Australian Hedge Fund Forum is a non-profit hedge fund conference organised by the industry for the industry, featuring quality Australian and internation

  2. Opalesque Roundtable: Success in hedge fund marketing not linked to performance, but investor appetite[more]

    Komfie Manalo, Opalesque Asia: Success in marketing a fund is not linked to the performance, but to investor appetite, to the way you can market the fund, and to how much time you can spend to raise assets, said Antoine Rolland, the CEO of incubator and seeding firm

  3. Opalesque Exclusive: Loeb, Grantham cite growing economic concerns in letters[more]

    Bailey McCann, Opalesque New York: Hedge fund manager Daniel Loeb, head of Third Point, and Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co. have both released their quarterly investor letters today. While news is positive on some fronts, and both men see pockets of opportunity, they also h

  4. Investing – Hedge funds expect Netflix earnings to catapult forward, Third Point's Loeb takes stakes in Fibra Uno, YPF, Royal DSM, Lake Capital in talks to back Engine Group[more]

    Hedge funds expect Netflix earnings to catapult forward From Investing.com: Netflix has made major strides forward in 2014 despite ongoing battles with the FCC and cable companies over the issue of net neutrality. The FCC has now received over 500,000 comments from the public on its pend

  5. Hedge fund manager Winton Capital making headway with long-only strategy[more]

    From PIonline.com: North American investors are helping Winton Capital Management Ltd. make progress — albeit slowly — toward its founder's goal of becoming a $100 billion company. The firm's ticket to quadrupling its assets under management is unlikely to be one of its scientifically designed manag