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U.S. Investors Turn Risk Averse at Year-End: State Street Survey

The State Street Investor Confidence Index finds global investors upbeat, unlike their North American counterparts

State Street Global Exchange says investors worldwide are slightly more optimistic in December – but not those in the United States.

The group’s Investor Confidence Index for the last month of 2015 rose 1 point from November to 108.3, according to a report released Tuesday.

“The improvement in sentiment was driven by an increase in the European ICI from 96.2 to 103.7, along with the Asian ICI rising 4.6 points to 105.1. By contrast, the North American ICI decreased by 5.9 points to 106.6,” State Street said in a press release.

In November, the Global Investor Confidence Index declined by 7.2 points, moving down to 106.8 from 114 in October. In North America, it fell nearly 12 points to 112.9 from 124.8 in October.

“U.S. investors have been showing an appetite for risk for much of 2015, but have been increasingly risk averse into year-end as uncertainty about global growth, weak commodity prices and the beginning of the Fed tightening cycle have eroded confidence to take risk,” explained Ken Froot, a co-developer of the index, in a statement.

“The knee jerk reaction from European equity and bond markets was to sell off together when the European Central Bank eased but failed to increase its asset purchases program in early December,” said Michael Metcalfe, senior managing director and head of global-macro strategy for State Street Global Markets, in a press release. “It appears European long-term investors were more forgiving as their allocation to risky assets went up over the course of the month.”

State Street’s Investor Confidence Index was developed by Froot and Paul O’Connell to measure investors’ confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors.

Other Surveys

Affluent investors were feeling more positive about their personal financial situation in November but remained wary of market conditions and concerned over recent terror attacks and continued threats, according to a recent Spectrem Group survey.

The Spectrem Affluent Investor Confidence Index gained 3 points in November, rising to 7. The Spectrem Millionaire Investor Confidence Index gained 9 points, rising to 15. Both indexes are at three-month highs.

Meanwhile, the latest Wells Fargo/Gallup Investor and Retirement Optimism Index had a reading of +59 in the fourth quarter of 2015, just one point from the third quarter and down 11 points from the first half of the year.

Looking longer term the index is up 11 points from a year ago but sits almost dead center in the range over its 19-year history. The latest reading is based on a survey of 1,018 investors conducted between Oct. 30 and Nov. 8, before the latest market drop.

Retirees are the most pessimistic. Their optimism index measured +47, down 23 points from the third quarter, while the optimism index for non-retirees rose 10 points to +63. This is the first time in over a year that non-retirees are significantly more optimistic than their retiree counterparts, according to the survey.

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