According to a statement by SSGX, the month of May saw “weakening” risk appetites of investors around the world as SSGX’s global investor confidence index (IC) fell from 115.3 in April to 103.5.
The Asian and European ICI both fell by 9.5 points from 112.7 to 103.2, and 111.0 to 101.5, respectively, while the North American ICI dropped 9.2 points, from 113.5 to 104.3.
Investor confidence recovered from a six-month drop in January and had been progressively rising until May, climbing from 95.7 in December 2018 to 115.3 in April.
Source: State Street
Commenting on the decline, State Street Associates head of investor behaviour research Rajeev Bhargava pointed to a number of factors that had “undoubtedly tempered enthusiasm” in global investors, such as “growing inflationary pressures, higher interest rates and geopolitical concerns.
“After a strong consensus in risk-seeking appetite last month, global investors now have a more subdued willingness to allocate to risk,” Mr Bhargava said.
ICI co-developer Kenneth Froot added: “Now, well into 2018, institutional investors face a challenging environment with a pick up in stock market volatility and elevated stock valuations despite strong earnings.
“The success of Eurosceptics in Italy has shaken investor appetite, while rising trade tensions between China, the EU and the US has escalated global concerns and uncertainty.
“It will be interesting to see how confidence plays out in the face of these risks,” Mr Froot concluded.
Developed by SSGX’s research and advisory arm State Street Associates, the ICI measures investors’ risk appetites by analysing their buying and selling patterns.
A reading of 100 is neutral (neither increasing nor decreasing allocations to risky assets), with a higher reading signifying greater risk appetite and vice versa.
