Global investor confidence has taken a hit for the first time in five months, according to the results of the latest State Street Investor Confidence Index (ICI).
Investor risk appetite, as measured by the Global ICI, dropped to 104.3 points in October, 4.6 points lower than in September when the index sat at 108.9 points.
“The move was largely driven by weaker sentiment in Europe and US, with the former falling just over 14 points, likely driven by escalating concerns that the European Central Bank may be well behind in the tightening cycle and therefore bring hikes forward,” said Rajeev Bhargava, head of investor behaviour research at State Street Associates.
“In addition, growing unease around UK fiscal outlook contributed to the volatility across European markets and in turn, to the decline in confidence locally.”
State Street reported that the European ICI was down 14.4 points to 86.2 while the North American ICI fell by 5.1 points to 104.0. In contrast, the Asian ICI lifted 4.1 points to 104.5.
The firm explained that the index measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.
A reading of 100 is considered to be neutral, with investors neither increasing nor decreasing their long-term allocations to risky assets.
The highest point for the Global ICI so far this year was reached in September (108.9), with above-neutral confidence in North America (109.1), Europe (100.6) and Asia (100.4).
Meanwhile, April was the lowest point for investor confidence globally (92.3) with low readings across Europe (76.2), Asia (91.5) and North America (94.1).
A previous survey of institutional investors by State Street identified an increase in the search for new sources of return amid market volatility and looming recession.
Bank loans, in particular, were said to be in demand globally as investors respond to the rising rate environment and consider their portfolio duration.
