The State Street Associates investor confidence index rose 7.1 points this month to 114.8 from a revised November level of 107.7. The index gain was the year’s largest, concluding 2003 at a twelve-month high after rising from 98.0 at the beginning of the year.
Developed by Harvard University professor Ken Froot and Paul O’Connell of State Street Associates, the index shows that institutional investors continue to be upbeat about the economic environment as the year concludes.
“Institutional investors remain very focused on positive economic signals, and have this last month become even more convinced we are returning to robust growth with low inflation,” says Froot. “This latest increase in risk appetite is the strongest we have seen in a very positive 2003, with nine of 12 months showing increases.”
“The increase contrasts with this year’s mixed signals from consumer confidence,” adds O’Connell. “Consumers have greater concern that higher productivity growth dampens the outlook for job creation. This has lead to an increased disparity between the caution felt by consumers and the willingness of institutional investors to hold risky assets.”
Launched in September 2003, the State Street Investor Confidence Index combines a model of global investor behaviour with information that tracks the common buying patterns of higher-risk investments by institutional investors around the world. Because the index is an unbiased quantitative measure of the investment behaviour of thousands of institutional investors, it is not directly tied to good or bad news, or to the price of stocks, bonds or other assets.