Confidence in markets took a tumble globally in the last month of 2016 as investors looked for “greater clarity” around changes facing US economic policy, according to the State Street Global Exchange Investor Confidence Index (ICI).
The ICI measures institutional investor trades to determine changes in risk appetite. A reading of 100 is 'neutral' and indicates that investors are neither increasing nor decreasing their long-term allocations to risky assets.
Both Asia and North America saw investor confidence fall, with the Asian ICI losing 6.7 points to settle at 109.1, and the North American ICI reaching 87.5, down 6 points on November’s reading, where the North American ICI was the only one to record an increase in confidence.
In contrast with this, the European ICI saw an increase of 13.7 points, growing from 86.4 to 100.1 points, which State Street Global Markets head of global macro strategy Michael Metcalfe noted came in spite of the ‘no’ vote in the Italian referendum and subsequent resignation of then-prime minister Matteo Renzi.
“This suggests investors are perhaps learning to live with political risk and adjust their portfolios accordingly,” he said.
ICI developer Kenneth Froot said the fall in the global ICI owed to apprehensions surrounding the US’s economic outlook.
“The global ICI finished on a weak note in 2016 as institutional investors continue to shy away from equities,” he said.
“Heading into 2017, investors are likely looking for greater clarity on their over-arching concerns regarding a Trump presidency and the hawkish tilt that accompanied the Fed's December rate hike.”
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