Investors' Mood Brightened In August – State Street

Editorial Staff

2 September 2022

A measure of investors’ buying and selling behaviour in financial markets showed that they grew more optimistic in August compared with July, brushing aside economic worries around inflation and other forces – at least for the time being.

The Global Investor Confidence Index, produced by , increased to 107.3, up 5.1 points from July’s revised reading of 102.2. The increase was led by a 20.4 point jump in the European ICI to 106.0. The North American ICI rose as well, up 2.1 points to 106.5. The Asian ICI, meanwhile, fell 0.9 points to 92.4.

“Despite the many potential headwinds, including rising inflation concerns and energy security facing the European economy, interestingly, European investors have moved from a risk averse posture to a more neutral posture over the past month as markets rallied through much of August,” Rajeev Bhargava, head of Investor Behavior Research, State Street Associates, said. “Even after the selloff over the past week, net flows by European investors have been from developed to emerging market stocks, which has driven up the confidence score. However, it is going to be important to monitor whether the enthusiasm persists given recent heightened volatility in equity markets on the back of increasingly hawkish Fed speak.”

The index measures investor confidence by analysing the buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.

Skyrocketing energy prices and fears about inflation, which have prompted central banks to raise interest rates, have chilled global markets. Earlier this week, Credit Suisse, for example, said it was cutting its equities exposure to underweight.