The March data for the State Street Investor Confidence was released this week and showed some very interesting patterns across institutional investors. The global index was up +4.7pts to 111.9 (contrasts to a reading of 95.7 back in December 2017), Across the regions, the North America index was up the most +5.8pts to 109.8, followed by Europe up 1.6pts to 102.1 and Asia up +1.3pts to 109.6. At a high level, basically what it appears to show is global institutional investors are “buying the dip”, or at least actively rebalancing into equities.
As a brief background on the indicator (from State Street):
“It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.”
The key points on global institutional investor sentiment are:
-Global institutional investors appear to be buying the dip.
-Institutional investor confidence improved across regions, particularly in Asia and North America.
-It seems these investors are looking through the noise/news and taking the opportunity to build allocations to risky assets as the correction provides a reset of sorts
1. Global Institutional Investor Confidence Index: The latest reading of the global institutional investor confidence index reached the highest level since March 2016. My first impression of this chart (shows the indicator vs global equities) is that I can’t help but think of the phrase “buy the dip” (which sometimes includes an F in there). So the main interpretation would be that institutional investors are buying the dip, or certainly at least actively rebalancing into equities as the correction provides a reset of sorts.