KirkLindstrom.com - Articles - 2012 - State Street Investor Confidence Index (ICI) versus S&P500
Kirk Windsurfing at Palo Alto in SF Bay in May 2009
 State Street Investor Confidence Index vs S&P500
State Street ICI versus the S&P500: 1998 through 2012 		Kirk Windsurfing at Coyote Point November 2009
More about State Street ICI

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September 25, 2012:  Today, the State Street Investor Confidence Index fell to 86.9 from last month's revised reading of 91.0.  North American investor confidence is now only 4.8 points above its all-time low of 82.1 reached near the bottom of the largest bear market since the Great Depression.  In their Press Release1, State Street said:
  • North American investor confidence continued to decline this month, falling 3.2 points from August’s reading of 84.3 to end at 81.1. Asian investors followed suit, with the Asian ICI declining 5.6 points to 87.6. Only European investors were an exception and an increase in risk appetite led the European ICI up by 4.0 points from 101.0 in August to 105.0 in Sept.
  • This month’s decline in global investor confidence is the result of diminished risk appetite among both North American and Asian investors,” commented Froot. “While diminished growth expectations for Asia account for some of the reticence in that region, the third consecutive decline in confidence among North American investors is more puzzling, especially given recent announcements by monetary policy makers on both sides of the Atlantic. It is clear that in their actual portfolios, institutional investors continue to exhibit caution given the global growth backdrop.”
  • “One point worth noting is that we observed a pronounced improvement in tone from the first week of September onwards.” added O’Connell. “Nonetheless, the reallocations away from risky assets early in the month were large enough to outweigh the later stabilization. As with last month, emerging markets continue to attract some positive inflows.”
Here is a chart of the State Street Investor Confidence Index versus the Standard and Poors 500 (S&P500) index from January 1998 through today.
 Historical Chart of 10-year treasury yields vs the DOW

More about the State Street Investor Confidence Index

Charts of the State Street Investor Confidence Index plotted versus the Dow Jones Industrial Average (DJIA), S&P500 and NASDAQ composite index (COMPQ) are key sentiment indicators for stock market technical analysis.  Contrarian theory states the time to buy is when fear and pessimism is at a maximum since this usually occurs near market bottoms.

According to State Street, the “State Street Investor Confidence Index® measures the attitude of investors to risk. Developed by Harvard Professor Ken Froot and State Street Associates Director Paul O'Connell, the Index uses the principles of modern financial theory to model the underlying behavior of global investors. Unlike other survey-based confidence measures that focus on expectations for future prices and returns, the Index provides a quantitative measure of the actual and changing levels of risk contained in investment portfolios representing about 15% of the world's tradable assets."

Note 1.  Source: http://statestreetglobalmarkets.com/research/pdf/pr.pdf
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