Investor Confidence Declined in December by 2.8 Points to 79.8

State Street Global Exchange today released the results of the State Street Investor Confidence Index® (ICI) for December 2018.

The Global Investor Confidence Index decreased to 79.8, down 2.8 points from November’s revised reading of 82.6. Confidence among North American investors waned, with the North American ICI decreasing from 79.2 to 74.1. The European ICI had an up-tick of 2.1 points to 94.0 while the Asia ICI increased by 8.7 points to 110.6.

The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business. 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.

 “Differences between the Fed and market observers over the importance of quantitative tightening exacerbated the anxiety for markets already on edge from trade disputes, Chinese growth and a slowdown in corporate earnings growth. In fact, the global ICI’s low level in December reveals a recent decline that is comparable in severity to what occurred during the global financial crisis,” commented Kenneth Froot.

“Global markets have faced sharp declines in the fourth quarter of 2018, continuing to dent investor confidence, and as we head into 2019, institutional investors will likely have a keen eye on global growth concerns and potential geopolitical headwinds,” said Rajeev Bhargava, managing director and head of Investor Behavior Research, State Street Associates.

The index is released globally at 10 a.m. Eastern time in Boston on the last Wednesday of each month. More information on the State Street Investor Confidence Index is available at http://www.statestreet.com/ideas/investor-confidence-index.html.