The Global ICI increased to 114.6, up 8.0 points from February’s revised reading of 106.6. Investors across all regions expressed a renewed appetite for risk, with the North American ICI increasing from 109.4 to 123.6, the European ICI rising from 90.2 to 95.3, and the Asian ICI from 111.5 to 112.2.
The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business. 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 long-term 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.
“We have seen a rebound in global sentiment in March after one of the worst starts on record,” said Jessica Donohue, executive vice president and chief innovation officer, State Street Global Exchange. “Oil prices have rallied and market volatility has subsided leading to a renewed enthusiasm for risk.”
“The upturn in confidence resulting from rebounding markets was particularly prominent among North American investors,” commented Ken Froot. “As the US economy remains on solid footing and continues growing at a moderate pace, risk seeking sentiment was boosted by more than 14 points in March, the sharpest increase in 12 months. It will be interesting to see how the Fed’s cautious stance continues to play into North American investor confidence and investor confidence globally.”