Institutional Investor Confidence Declines in February

February 21, 2006 ( - State Street Global Markets, the investment research and trading arm of State Street Corporation, reported that the State Street Investor Confidence Index for February showed institutional investor confidence decreased to 73.4 from January's revised reading of 77.

Regionally, the confidence of North American institutional investors fell to 85.5 in February from a revised reading of 89.8 in January, according to a press release on the Index results. The European Index increased from 73.7 in January to 77.9, and the Asian Index declined from 82.9 to 81.9 in February.

“Once again, we see that the risk appetite of North American institutional investors is negative this month, backed by further sales of US equities,” Harvard University Professor Ken Froot said in the release. “This has led to the second consecutive month of record lows for global confidence.

State Street Associates Director Paul O’Connell said, “It seems that our North American institutional investors currently agree more with the outlook of the bond market versus that of the stock market.   The slight but recurring inversion of the US Treasury yield curve suggests concern that the Federal Reserve will raise interest rates before long. This suggests that even some equity investors worry that the Fed will end up reducing growth as it moves to contain inflationary pressures.”

The State Street Investor Confidence Index measures investor confidence on a quantitative basis, analyzing actual buying and selling patterns of institutional investors. The index is based on financial theory that assigns precise meaning to changes in investor risk sentiment, or the willingness of investors to hold proportionally more or less of their portfolio inequities. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.

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