State Street Investor Confidence Index Rises In October

The State Street Investor Confidence Index posted its second rise of the year in October. Although the 0.9 point rise in the index has made only a tiny impression on the 24 point fall seen during the first seven months

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The State Street Investor Confidence Index posted its second rise of the year in October. Although the 0.9-point rise in the index has made only a tiny impression on the 24-point fall seen during the first seven months of this year, the fact that investors are not reducing their exposure to risky assets in the face of deteriorating fundamentals is an encouraging sign for equity markets and risky assets more generally, say the State Street analysts.

Added to the potential uncertainties surrounding the upcoming US election and the current earnings reporting season, the fundamentals suggest that investors have plenty to be concerned about. October has already seen another 8% rise in oil prices, taking crude prices through the psychologically important USD50 per barrel level.

Meanwhile, preliminary October estimates of US consumer confidence (University of Michigan) point to another fall this month, as do regional measures of US manufacturing activity (the Empire State survey). If these preliminary estimates prove accurate, US consumer and business confidence will have fallen for four consecutive months. Investor confidence, in contrast, has stabilised over this period.

State Street says the fact that investor confidence fell for the first seven months of the year and has now stabilized suggests that professional investors reduced their allocations to risky assets in anticipation of slower growth and higher oil prices and as a consequence their confidence is now less vulnerable than either consumers or business to the latest wobble in growth.

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