State Street’s Global Investor Confidence Index (ICI) has increased to 107.7, an 11.4 point climb from July’s revised reading of 96.3.
This increase, the most significant in the last 18 months, was supported across all regions, led by a 12.9-point rise in the North American ICI to 103.8.
Elsewhere, the European ICI rose 4.3 points to 103.7 and the Asian ICI added 4.8 points to 102.2.
An ICI reading of 100 is neutral, where investors are neither increasing nor decreasing their long-term allocations to risky assets. The index is based on the actual trades, as opposed to opinions, of institutional investors.
According to Marvin Loh, senior global macro strategist at State Street Global Markets, the Global ICI is now solidly in risk-seeking territory as risk appetite has seen significant progress.
“The improvement was led by North America, which recorded its strongest reading in a year on the heels of falling recessionary concerns. A pair of better-than-expected CPI prints have also supported the view that a soft landing was possible,” Mr Loh noted.
“While the monthly gain was not as strong in Europe, this regional ICI bounced back above 100, as overall disinflation started to accelerate, with a tenuous economic backdrop holding back further gains.”
With the Asian ICI showing a similar investor dynamic, Mr Loh added that the region is swinging back towards a moderate risk appetite, although further gains were impacted by economic challenges in China.
State Street has also announced the retirement of the ICI, effective 25 October 2023.
According to the firm, the index will be replaced with the Institutional Investor Holdings and Risk Appetite Indicators, both having launched on 5 May 2023.
Namely, the Institutional Investor Risk Appetite Indicator is derived from measuring investor flows in 22 different dimensions of risk across equities, foreign exchange, fixed income, commodity-linked assets and asset allocation trends.
The index captures the proportion of risk elements that saw either risk-seeking or risk-reducing behaviour, with a positive reading suggesting that on balance investors are adding to their risk exposures.
Meanwhile, the Institutional Investor Holdings Indicator captures the share of investor portfolios allocated toward equity, fixed income, and cash going back to 1998.
“The Institutional Investor Indicators represent the next generation of our Investor Confidence Index,” commented Will Kinlaw, head of research at State Street.
“Building on what the ICI began two decades ago, these indicators will provide richer insights into how this influential block of investors is positioned and where their assets are flowing, at an aggregated and anonymised level.”
“We’re pleased with the positive feedback from our clients and the media and look forward to proceeding with the transition,” Mr Kinlaw concluded.