The monthly Investor Confidence Index published by State Street has picked up the most significant rise in confidence so far this year.
The State Street Investor Confidence Index for August 2004 increased by 2.4 points from July’s revised reading of 84.6. Developed by Harvard University professor Ken Froot and Paul O’Connell of State Street Associates, the index shows that August was a rare month for 2004, offering the largest monthly increase, although one that is still relatively small. “This is a welcome break from the almost relentless decline in investor risk appetite witnessed this year,” says O’Connell, “While we have staunched the outflow, this month’s increase remains fairly small by historical standards. In August, institutional investors saw prices that make risk considerably cheaper to hold. They finally reacted positively to that.”
“Considerable uncertainty remains,” says Froot. “In August, investors bought European, U.K., and, to lesser extent Japanese risky assets, but comparable U.S. stocks remained out of favor. Construction, air freight, and building products have been buys, but electronics, telecommunications, biotechnology and healthcare still have not reached a turnaround. The mixture says that investors remain unwilling to jump in with both feet.”