Despite investor confidence increasing fractionally globally in March, confidence has unsurprisingly plummeted in Europe as the continent faces the spectres of both a hard Brexit and the election of right wing populists to the European Parliament in May.
The State Street Investor Confidence Index (ICI) for Europe dove 7.8 points from February to hit 88.4, compared to a global increase of 0.4 for the global index, which reached 71.3 for March. The North American index also showed low confidence, with a rating of 68.3. While this was higher than February’s score of 66.2, it was still quite low, possibly reflecting the political risks associated with the US-China trade talks going pear-shaped.
The Asian ICI climbed in comparison, jumping 3.6 points in March to hit 100. A reading of 100 was neutral, meaning investors were neither increasing nor decreasing their long-term allocations to risky assets.
Senior managing director and head of global macro strategy at State Street Global Markets, Michael Metcalfe, said that the recovery in investor confidence this year was surprisingly shallow given the ‘V-shaped’ recovery in risky assets’ prices.
Kenneth Froot, who developed the index, cited mounting political uncertainty as possible cause, suggesting that this could be driving North American and European investors away from risk. Metcalfe suggested that the continued deterioration in fundamental news could also be responsible for the latter’s decline.
The ICI measured investor confidence by quantitatively analysing the actual buying and selling patterns of institutional investors.