The Dow has once again retreated from 18,000, but if State Street’s investor confidence index is predictive, it could soon top that psychologically important level.
Confidence among North American institutional investors soared in March, up 30 points to 135.4, according to the latest State Street Investor Confidence Index. Confidence among European and Asian investors, however, fell slightly, with Asian investors actually turning negative on buying risky assets.
The State Street index is based on actual trading data of institutional investors and equates increases in equity allocations with an increase in investor confidence. Any measure above 100 indicates a higher risk appetite for equities and other riskier assets.
Confidence among North American investors increased the most because of “reduced short-term interest rate forecasts for 2015 and 2016 by the Federal Reserve and the commencement of sovereign quantitative easing by the European Central Bank,” Kenneth Froot, one of two developers of the index, said in a statement. But he warns that “market setniment, like the Federal Reserve, will likely be highly data dependent over the next couple of months.”
While institutional investors may be more optimistic about the stock market, affluent individual investors are not. The Spectrem Group’s investment preferences survey for March shows that affluent investors in the U.S. — defined as those with $500,000 or more in investable assets — expect to buy fewer stocks than they did the month before. They were also likely to invest in cash. The only category that showed an increase was the “Not invest” category, suggesting a holding pattern among investors. The survey is based on monthly interviews with 250 investors.