Ongoing political instability continues to weigh on investor sentiment, with global investor confidence sagging in January, 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.
Global confidence fell 0.3 points from the previous month’s reading to 93.8, led by a 7 point decline to 92.9 in the European ICI and a 0.4 point dip in the Asian index to 108.1, though the North American ICI rose 2 points to settle at 89.6, State Street Global Exchange said.
“Stretched valuations and geopolitical risk did not support global sentiment at the start of 2017,” said ICI developer Ken Froot.
“While financial markets crave political stability, political change is disruptive. With the new US administration taking office mid-month, worries about trade policies and a stronger dollar have taken centre stage in 2017.”
State Street Associates managing director and head of investor behaviour research Rajeev Bhargava said European confidence had “moderated somewhat” after the December’s “more constructive vote”.
“Concerns surrounding the impending French and Dutch elections as well as a hard Brexit may have fuelled this cautious tone,” he said.