State Street’s Investor Confidence Index has fallen again – for the sixth time in the last seven months.
According to the July index, investor confidence declined by 1.2 points to 84.3 from June’s revised reading of 85.5.
This month the index shows a modest decline, but it is the sixth decline this year, reflecting a strong change in sentiment since the end of 2003. The reading indicates that institutional investors reduced the overall risk of their portfolios by systematically cutting average equity positions when measured in proportion to their holdings.
“It’s becoming clear that investors do not see sufficient growth in earnings to justify recent price levels, especially in the context of increasing interest rates,” says a spokesman for State Street. “This decrease is driven by a decline in investor sentiment, but U.S. equities are clearly leading the way.”
U.S. Telecommunications sectors seem to be taking the brunt of the decline in confidence, with relatively large and sustained recent outflows. “The high hopes that the second half of 2004 was the beginning of yet another sustained bull market are now all but gone,” states the spokesman.