Investor confidence slumps
Investor confidence has fallen from 82 points to 74.3 worldwide, according to the Investor Confidence Index released by investment research and trading house State Street Global Markets.
The results showed that during the month of November, global investor confidence fell by 7.7 points to a level of 74.3 from last month’s reading of 82 points. North American investors were the key drivers of this decline, as investor confidence levels fell from 90.4 to its second lowest reading ever of 78.9.
Harvard University professor and co-developer of the index, Ken Foot, said investors have now decided that the risks to the underlying economy are much greater than before and have reduced their allocations to risky assets.
“This month’s decline in the investor confidence index takes place against a backdrop of deteriorating fundamentals, including a diminished outlook for consumer spending and global growth, and some acute credit pressures on the financial sector,” he said.
“The data, produced by State Street Associates, shows that US investors have reduced their allocations to equities, particularly in the emerging markets, but also in the US.”
State Street’s Andrew Capon said that the latest fear dealing with sub-prime is that it will spread globally via an economic slowdown and a collapse in consumer confidence.
“The fact that the index is now lower than in the aftermath of the Russian debt default and the collapse of Long-Term Capital Management is telling … This current bout of fearfulness is both more persistent and more pernicious.”
According to Capon, the results also suggest investors believe that further rate cuts in December are a “forgone conclusion”, despite the claims of US Federal officials that they have been cut as far as they dare.
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