State Street’s Investor Confidence Index increased 2.4 points in August from July’s revised reading of 84.6. August’s increase was the largest to date in 2004.
“This is a welcome break from the almost relentless decline in investor risk appetite witnessed this year,” said State Street Associates’ Paul O’Connell, one of the developers of the index. “While we have staunched the outflow, this month’s increase remains fairly small by historical standards. In August, institutional investors saw prices that make risk considerably cheaper to hold. They finally reacted positively to that.”
Pointing to August’s results, co-develop of the index, Harvard University professor Ken Froot, said uncertainty is evident in investors’ moves. “In August, investors bought European,UK, and, to lesser extent Japanese risky assets, but comparable US stocks remained out of favor. Construction, air freight, and building products have been buys, but electronics, telecommunications, biotechnology and healthcare still have not reached a turnaround. The mixture says that investors remain unwilling to jump in with both feet.”