State Street Global Markets, the investment research and trading arm of State Street Corporation has released the results of the State Street Investor Confidence Index for July 2011.
Investor Confidence rose very slightly in July to 101.1, up 2.2 points from Junes revised level of 98.9. Confidence declined marginally among North American investors, whose reading fell 1.3 points to 99.2 from Junes revised level of 100.5. A similar decline was recorded for Asian investors, with the reading there falling 2.1 from Junes revised level of 92.2 to 90.1.
After a weak spell in recent months, European investor confidence continued to increase, rising 10.5 points to 98.1 from Junes level of 87.6.
The State Street Investor Confidence Index was developed by Harvard University professor Kenneth Froot and Paul OConnell of State Street Associates. It measures investor confidence or risk appetite quantitatively by analyzing the actual 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 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.
This month institutional investors were reacting strongly to the differential risk outlooks in Europe and the US, commented Froot. In an environment in which major country policy makers are grappling with sovereign debt and deficit issues, the influence of a few pieces of news can be enormous. The added policy risk in the US and Europe has institutional investors in a reactive mode, trying to position and then reposition as the situation changes.
Looking regionally, we see some meaningful differences, added OConnell. It seems that European investors took to heart the European Monetary Union announcements at the end of last week that take us closer to an orderly resolution of peripheral debt concerns. In the US and Asia, these positive European developments had much more muted impacts on portfolios, with the overall mood remaining cautious, especially around the US debt ceiling and credit rating.
State Street Corporation is one of the world’s largest providers of financial services to institutional investors, including investment servicing, investment management and investment research and trading. With $22.8 trillion in assets under custody and administration and $2.1 trillion in assets under management at June 30, 2011.
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