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Institutional Investor Confidence Dips for Fifth Month

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State Street Global Exchange reported Tuesday that its Global Investor Confidence Index for December fell 1.5 points to 94.8 from November’s revised reading of 96.3.

“After peaking in July this year, investor confidence has now fallen for five consecutive months; the last three of which have seen investors reduce their holdings of risky assets (an index reading below 100),” Michael Metcalfe, senior managing director and head of global macro strategy at State Street Global Markets, said in a statement.

“While the broader economic outlook appears increasingly rosy, as captured by measures of consumer and business confidence, the more cautious nature of investors hints at a concern that financial markets may have already discounted much of the good news.”

A recent survey found that global investors’ cash balance rose in December for the first time in four months, paving the way for more risk asset upside in the beginning of 2018.

The Global Investor Confidence Index measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. A reading of 100 is neutral, the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.

December’s fall in sentiment resulted in a 6.2-point drop in the North American index to 94.9 and a 2.8-point fall in the Asian index to 94.8, according to State Street. However, the European index rose 16 points to 96.9.

“In Europe, healthy growth and continued European Central Bank asset purchases may have helped to boost investor confidence,” said Kenneth Froot, who developed the index with Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business.

“Although the index remains below 100, it seems that European-based investors are becoming less concerned that political risks could derail the strong economic performance across the region.”

— Check out Mixed Bag for Bonds in 2018 on ThinkAdvisor.