ChartBrief #21 Investor Confidence Index
The “State Street Investor Confidence Index” is a quantitative measure of investor confidence (as opposed to surveys) run by State Street (presumably using their vast client data as one of the world’d largest asset management custodians). When the index rises above 100 it means institutional investors are allocating more money to risky assets (equities), and then it goes below 100 it means they’re allocating less to risky assets (and by implication more to cash/bonds). The chart below shows the index by region (note when they say region they mean region of domicile of the investors – so it’s like Asian institutional investors as opposed to flows going into Asia per se).
Should You Go All In On Water Like Michael Burry?
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The reason I post this chart is for a couple of reasons, first of all someone requested it (in comments on this Seeking Alpha article), also by the way – it appeared in a previous edition of our institutional product: “Weekly Macro Themes“. The other reason is there are some interesting trends worth pointing out. First is the surge in Asian institutional investor confidence, and the slump in European investor confidence. I noted elsewhere that those two indexes seem to work as leading indicators, so that’s something to consider when thinking about Asian vs European equities. The other point is that North American institutional investor confidence has gone from extremely buoyant in 2015 to below the 100 point – but importantly, rebounded slightly in the latest reading. No doubt political risk and uncertainty has a role to play in this, and with the election almost here – a clearing of that hurdle could clear the way for that index to go higher. Watch this space…
Bottom line: European and North American investor confidence has slumped, while Asian institutional investor confidence has surged.