Institutional investors are feeling generally more upbeat, according to the latest monthly State Street investor confidence index.
The confidence level among institutional investors around the world increased this month, with the index rising by 4.7 points to 91 from May’s revised reading of 86.3.
North American institutional investors are particularly upbeat, with the confidence level for that group climbing to 108 from 99, continuing an uptrend that has seen the index for the group rise from 83.3 in February.
Asian investors also are even more positive on the market than they were last month. But the confidence level of European investors has deteriorated, with the index for that group dropping to 87.2 from 93.9.
“In the supposedly rational world of financial markets, the gloom wrought by declining equity prices has for the second consecutive month failed to dent the confidence of institutional investors, at least those located within the U.S.,” said Michael Metcalfe, senior strategist at State Street Global Markets, in a news release.
The State Street confidence index measures investor confidence on a quantitative basis, by analyzing the actual buying and selling patterns of institutional investors around the world. The index is based on a theory that assigns meaning to changes in investor risk sentiment, or their willingness to hold proportionally more or less of their portfolio in equities. The more of the portfolio held in equities, the greater the investors’ risk appetite or confidence.
“Our data gives solid footing to recent surveys suggesting that stock prices are highly likely to rise through the end of the year,” said State Street Associates director Paul O’Connell. “There is no question that in the early spring the market underestimated the degree to which inflation pressure would continue to build,” said Harvard University professor Ken Froot, who developed the index with O’Connell for State Street Associates. “However, the fall in prices and the recognition that relatively minor additional [interest rate] increases are needed has brought professional investors back as buyers,” he added.