Global investor confidence on the rise

Global investor confidence rose in December compared with the previous month as investors put more money into risky assets, according to the US investment bank State Street Investor Confidence Index.

The index is compiled by State Street and Harvard professor Kenneth Froot, and looks at investors’ appetite for more high-risk assets across US, European and Asian markets.

The Global ICI rose to 95.9 in December, up 4.7 points from November’s revised reading of 91.2. The increase was the result of a mild increase from 89.2 to 90.2 in US sentiment combined with a strong increase in European sentiment, rising to 107.1 from November’s revised reading of 101.0. Sentiment in Asia fell slightly to 98.5 from 99.3, fuelled by increased growth concerns in the region, said State Street.

“Continued improvements in US fundamental economic data, especially around jobs, seem to have finally taken precedence over Fed tapering for investors,” said Prof Froot.

“It hasn’t been uncommon to see good fundamental news hurting risk assets as investors worry about the future of quantitative easing and the initiation of tapering.

“The Fed has finally worn investors down to a more jaded interpretation of tapering under which the economy no longer needs such a strong form of life support.

“Under this interpretation, investors embrace higher interest rates as the inevitable but bearable downside of solid growth rather than as evidence that market liquidity will become constrained and that growth will fall.”

“However, a disjuncture remains,” said Michael Metcalfe, head of cross strategy research at State Street Global Markets.

“Emerging markets investors are still concerned that tapering will strangle world growth instead of seeing higher rates as a result of stronger growth worldwide.

“We can see this in the way risk assets in emerging economies continue to struggle and also in this month’s mild decline in Asian investor confidence.