State Street Global Exchange has released the results of the State Street Investor Confidence Index (ICI) for January 2014.
The Global ICI rose to 114.4 in January, up 18.6 points from December’s revised reading of 95.8. The reading was the largest in over four years and was driven by a sharp increase in North American sentiment from 92.1 to 113.6 along with increases in both European and Asian sentiment.
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European sentiment rose to 112.6 from December’s revised reading of 107.5. Sentiment in Asia rose to 103.5 from 97.7.
The Investor Confidence Index was developed by State Street Associates, State Street Global Exchange’s research and advisory services business, and Harvard University professor Kenneth Froot. It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors.
The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.
The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.
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By GlobalDataJessica Donohue, senior managing director and head of research and advisory services, State Street Global Exchange, said: "Policy uncertainty was reduced in the US and confidence was boosted by optimism over the Fed’s policy of forward guidance, which may help anchor low interest rates going forward. It will be critical to see how sentiment holds up during the debt ceiling debate given the renewed concerns over emerging market growth."
Froot said: "In Europe, stronger economic fundamentals and looser monetary policy led to improved sentiment. Easier financing conditions for peripheral European sovereigns and speculation for more unconventional measures by the ECB, given below target inflation, has led to broader optimism among institutional investors."
