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State Street Investor Confidence Hits a New All-Time Low

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Global Investor Confidence as measured by State Street Corporation dropped to its lowest level ever this month.

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Developed by Harvard University professors Kenneth Froot and Paul O'Connell of State Street Associates, the State Street Investor Confidence Index measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: The greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.

Since inception of the State Street Investor Confidence Index in 1998, global investor confidence has ebbed to a 14-year low as October's reading of 80.6 surpasses October 2008′s reading of 82.1. State Street readings are monthly.

In the chart below, I plot the Global Confidence data (black line) with the SPX (green line) since early 2000. Eerily, this measure is now below that of the "Great Recession," when the grips of financial panic were setting in during late 2008 and early 2009.



Per Slate Street's press release: "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."
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