An investor confidence index maintained by State Street Global Exchange, a unit of State Street Corp., posted a September reading of 101.4 in September, down 3.5 points from August’s revised reading of 104.9.
A reading of 100 is neutral, neutral being defined as the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.
The index takes a monthly snapshot of investor confidence both globally and by regions. The drop in the September reading was driven by sentiment in North America, which declined 7.6 points to 104.5 from August’s revised reading of 112.1, said officials at State Street Global Exchange, which is part of State Street Corp., a Boston-based financial services company.
That investor confidence snapshot is taken mid-month.
In September’s case, it was taken just as the Federal Reserve unexpectedly announced that the US economy isn’t yet healthy enough for the central bank to ease up its stimulus efforts. Earlier, the Federal Reserve had been hinting that the US economy had improved to the point at which such stimulus efforts could start being tapered off.
The investor confidence Index was developed by State Street Associates and Harvard University professor Kenneth Froot. It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors.
In a statement Tuesday, Froot referenced the recent unexpected move by the central bank’s Federal Open Market Committee, or FOMC.
“September’s Global reading on investor sentiment, taken before the FOMC’s decision to delay the taper, gave back some of the recent gains but remains robust,” Froot said. “Similarly positive business confidence readings suggest that investors will be resilient to the reduction in the Fed’s asset purchases when they finally come.”
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