The October reading of the investor confidence index from State Street dropped -3.4pts to 84.4 – the lowest reading since late 2012. Across the regions, North American institutional investor confidence dropped -2.6pts to 81.8, and the European index dropped -10pts, while the Asian index was almost unchanged, just off -0.3pts.

The global institutional investor confidence index had been declining since the peak this year in April, and dropped below 100 in August – so arguably it provided an advance warning to the global market correction which has intensified since the US ‘joined the party’ in October. Clearly the larger investors are voting with their feet in terms of how they see things playing out from here…

From State Street – the Investor Confidence Index:

“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 long-term 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.”

1. Global Institutional Investor Confidence Index: First chart shows the global index – it’s an interesting indicator in that it sometimes provides contrarian signals, and at the very least provide some context on what the larger investors are doing. So the big question really is whether this is presenting a contrarian/oversold signal at this point… or is a harbinger to a secular turn in the market. (my guess would be the former, but then again we are late in the cycle)

2. Institutional Investor Confidence – by region: This chart shows the investor confidence indexes by region – notably its North American investors who are pulling in their horns the most… which is interesting given that the American market had been relatively resilient compared to its global peers – so it could just be a case of an overdue shakeout.