A measure of global investor confidence backed by real money flows collapsed 8 points in August

Photo by Ricardo Bufolin/Getty Images

You wouldn’t know it by looking at the US stock market, which is resolutely holding near all-time highs in its summer torpor, but investor confidence collapsed 8.3 points to 89.7 according to the August edition of the State Street Investor Confidence Index.

But it was US confidence which drove the big fall, State Street said, with “a decrease in the North American ICI from 99.8 to 89.5 and the European ICI from 92.4 to 86.8”. Asian confidence remained relatively robust, dipping just 2 points to 106.1 in August.

The index, which was developed by Kenneth Froot and Paul O’Connell at State Street Associates, measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.

So this is not just a sentiment index – it’s backed by pure money flow.

That makes the strength in US equities remarkable.

“The recent ‘melt-up’ in risky asset valuations does not appear to be endorsed by institutional investors,” Timothy Graf, head of Macro Strategy, EMEA, at State Street Global Markets said.

“The exception to this would be the resilient sentiment we see in Asia, perhaps a reflection of receding fears of a hard landing in China.”

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