State Street Global Markets says the State Street Investor Confidence Index is up for January 2005.
According to the January index, investor confidence increased slightly by 0.2 points from December’s revised reading of 90.1. Developed by Harvard University professor Ken Froot and Paul O’Connell of State Street Associates – the research unit of State Street Global Markets – the index shows that institutional investors’ appetite for risky securities continues to grow slowly from pre-election lows. The index identifies the tendency for thousands of professional investors to proportionately grow their positions in tens of thousands of risky securities over the month.
“The slight increase throughout January belies considerable divergence in geographic flows,” remarks Froot. “While developing Asia continues to see strong institutional investor buying, the most established equity markets, namely the U.S., UK and Canada, are all quite weak. Concerns of further U.S. dollar declines and risks have made investors wary of risky U.S. investments today.”
“Over the past month, the U.S. Federal Reserve has also reminded investors of U.S. inflationary pressures,” adds O’Connell. “In addition to currency issues, there are greater concerns now around rapid U.S. growth. The Fed will not tolerate increases in core inflation, and is prepared to increase interest rates and slow prospective U.S. growth if need be.”