US exchange volatility hurts investor confidence
Investor confidence took a dive in May due to the volatility experienced on the US exchanges on May 6, uncertainty regarding the British elections and Europe's continuing woes.
According to the State Street Global Markets Investor Confidence Index for May, investor confidence had fallen 11.2 points to 88.2 globally since April's reading.
The index revealed that declines in sentiment in North America were a key contributor, with institutional investor confidence falling 5 points. Confidence also fell among European investors, from 95.7 to 92.2 points. However, Asian confidence rose 6.8 points to reach 101.
The index analyses the actual buying and selling patterns of institutional investors, following the premise that the greater the percentage allocation to equities, the higher the risk appetite or confidence.
"This month we saw institutional investors continue on the course they set last month, leading to substantial cuts in risk allocations," said index developer Ken Froot. "As was true at the onset of the sub-prime credit crisis in 2007, institutions were prescient with the cutback in risk that they instituted in March, even as markets continued to rise. The continued deleveraging that we see this month signals that there is considerable uncertainty around euro-region deficit levels, and their knock-on implications globally."
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