For all the hyperbole about what the Trump victory means for the global economy and all the moves across currency, bond, commodity and interest rate markets it seems that big global investors are focussed on the potential negatives of a Trump presidency.
That’s the message in the latest State Street Global Exchange Investor confidence index (ICI) which fell 3 points to 98.9.
The index, which measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors, holding below 100 globally shows investors are still allocating away from risk assets.
Interestingly, institutional investors in the US only marginally increased risk assets like equities this month with the North American ICI rising just 0.1 points to 95.7.
In Europe, investors cut their allocations to risk, driving the European ICI down 2.6 points to 86.5.
“While global markets continue to decipher the economic and political effects of a Trump presidency on the heels of Brexit, the decline in the Global Index suggests that institutional investors remain reluctant to embrace market reactions,” said Ken Froot, the co-developer of State Street’s ICI.
But the index does confirm recent capital flow data showing investors have been selling Asian assets with the Asian ICI dropping 4.6 points to 116.1.
That level could be comforting given it represents institutional investors remaining overweight risk assets like equities in Asia.
But more likely it could serve a warning to the region’s central banks that they are at risk of continued and significant capital flight if the ebullience of the initial Trump rally, and concerns about the impact of his policies on Asian businesses and economies, becomes entrenched.
Jessica Donohue, State Street Global Exchange’s executive vice president and chief innovation officer, noted this risk saying: “Trump’s victory has clearly exacerbated anti-globalisation jitters”.
If those fears prove true, this index suggests there is potentially much more pressure on the region and its currencies as institutional switch assets back toward the US.
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