Investor Confidence Ticks Up, Indexes Show

Consumer Confidence Index, State Street and Spectrem Investor Confidence Index show outlooks for the economy and labor market have either improved or roughly stayed the same throughout August

Geopolitical tensions seem to be keeping some affluent investors out of the market, Spectrem says. Geopolitical tensions seem to be keeping some affluent investors out of the market, Spectrem says.

Confidence in the economy and labor market among global investors and consumers generally has increased over the past month, according to three different investor or consumer confidence indexes, with marginal changes seen among North American and affluent investors.

The State Street Investor Confidence Index for August is up 7.2 points globally versus July, but domestic investors’ confidence decreased minimally. The global index rose to 122.8 in August from July’s revised reading of 115.6, State Street Global Exchange announced Tuesday.

While the risk sentiment in North America fell one point to 110.3, State Street attributes the global improvement in sentiment to an increase in the Asian ICI from 92.1 to 101.7 and a six-point increase in the European ICI to 127.7.

“Despite a bout of risk aversion driven by geopolitical tensions in the early days of August, global institutional investor confidence remains resilient,” said Jessica Donohue, senior managing director and head of research and advisory services for State Street Global Exchange, in a press release. “With benign developed market inflation, institutions may be positioning for continued accommodative policy from central banks.” 

The State Street Investor Confidence Index, unlike survey-based measures, gauges investor confidence or risk appetite by analyzing the actual buying and selling patterns of institutional investors. State Street assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence.

Meanwhile, Spectrem Group, a market research and consulting firm specializing in the affluent and retirement markets, found its affluent investor confidence index unchanged in August and its millionaire investor confidence index up 1 point from July.

According to George H. Walper Jr., president of Spectrem Group, these results indicate continued caution and wariness among affluent investors.

“For the third consecutive month, there wasn't a significant increase in affluent investors who said they intend to hold on the investment sidelines in the coming month rather than invest," said Walper in a statement. "While the market continued flirting with unprecedented highs in August, crises overseas have tempered investor optimism. Affluent investors are telling us that developments in Ukraine, Israel and Iraq are at present the news stories having the most impact on their economic outlook."

The August Spectrem Affluent Household Outlook, another measure of affluent investor confidence, edged downward for the third consecutive month, particularly among millionaires, who generally have a more optimistic outlook.

The Spectrem Affluent Investor Confidence Index is based on 250 monthly online interviews with the financial decision-makers in households with $500,000 or more in investable assets, and the Spectrem Millionaire Investor Confidence Index is based on a subset of the overall survey group.

Confidence among consumers remains more optimistic. The Conference Board Consumer Confidence Index increased to a new recovery-to-date high in August, surpassing forecasts. The Conference Board index rose to 92.4 in August from a revised 90.3 in July.

“The labor-market-sensitive Conference Board index continues to improve, consistent with the positive message from most labor market data recently,” stated Jim O'Sullivan, Chief U.S. Economist, in a note from High Frequency Economics. “At 92.4, the index is up from 73.2, on average, in 2013 and 67.1 in 2012.  It was over 100 before the recession.”

According to Lynn Franco, director of economic indicators at The Conference Board, the consumer confidence increased for the fourth consecutive month.

“[I]mproving business conditions and robust job growth helped boost consumers’ spirits,” she said in a statement. “Looking ahead, consumers were marginally less optimistic about the short-term outlook compared to July, primarily due to concerns about their earnings. Overall, however, they remain quite positive about the short-term outlooks for the economy and labor market.”

The consumer index found that fewer consumers expect their incomes to grow, 15.5% in August versus 17.7% in July, while those expecting a drop in their incomes rose marginally to 11.9% from 11.1%.

Their opinion on the job market continued to improve through August, with those stating jobs are “plentiful” increased to 18.2% from 15.6%, while those claiming jobs are “hard to get” declined marginally to 30.6% from 30.9%.

The monthly Consumer Confidence Survey is based on a probability-design random sample.

 

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