State Street Investor Confidence Index Sets All Time Record Low

October 30, 2012: Today, the State Street Investor Confidence Index fell to80.6 from last month's revised reading of 87.3. North American investor confidence is currently at a RECORD ALL TIME LOW that is 2 points below the prior 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:

The large drop in Global confidence stemmed from a steep drop in European sentiment, with the European ICI falling 10.3 points to 94.9 for the month. Risk appetite decreased among North American investors as well, falling 2.7 points from September’s reading of 81.7 to 79.0. Asian investors followed suit, with the Asian ICI declining 2.9 points to settle at 84.5, the lowest level since the inception of the index..

“Globally, institutional investor confidence is at the lowest level it has been since the inception of the ICI in 1998 and this month’s reading is 1.5 points below the previous low set in October of 2008."

"Institutional investors continue to display a pronounced, almost secular desire to reallocate away from equities and towards fixed income and cash securities, and this desire has accelerated through the recent market correction.”

“In 2008, the last time that global investor confidence was in this range, the regional pattern was somewhat different. North American institutional investor confidence was about 6 points lower, but Asian investor confidence was 10 points higher. This shift is reflective of the changed investment outlook, with improved US prospects offset by slowing growth in the Asian region. The net effect is that institutional investors have little appetite for risky assets.”

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."

Article: Beware of Annuities

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