Investor Confidence Index Falls in January

Margarida Correia

The State Street Investor Confidence Index fell 2.1 points in January to 92.4 from 94.5 the month before, State Street Corp. announced Tuesday. In North America, the index fell .1 point to 89.8, and in Europe it fell 10.1 points to 91.6. In Asia, however, the index rose 3.3 points to 96.9.

The monthly index measures investor confidence or risk appetite by analyzing actual buying and selling patterns of institutional investors, according to a statement by State Street Global Markets, the investment research and trading arm of State Street Corp. A reading greater than 100 means that institutional investors are increasing their allocations to risky assets, meaning they’re buying stocks. A reading less than a 100 indicates the opposite: investors are selling equity positions. A reading of 100 is neutral, meaning that institutional investors are neither increasing nor decreasing their allocations to risky assets.

“What is clear from the latest data is that institutional investors in both North America and Europe display increased caution as we embark on 2012, maintaining equity positions that can best be described as defensive,” Kenneth Froot, a Harvard University professor and co-developer of the index, said in statement.

Paul O’Connell of State Street Associates, the other co-developer of the index, added,

“It is clear from the significant decline in the European ICI that questions about the resolution of the European sovereign debt crisis remain uppermost in investors’ minds. A look at the underlying data reveals that investors did commit some new funds to emerging markets equities in January. It remains to be seen whether these flows will translate into wider commitments across more markets as we go through the quarter.”