Investor Confidence Index Advances in January

State Street Global Markets, the investment research and trading arm of State Street, released the results of the State Street Investor Confidence Index for January 2009. Global Investor Confidence increased by 12.1 points to 60.3, from December's revised level of 48.2. The move higher was led by North American institutional investors, whose confidence climbed 21.2 points from December's record low of 30.6 to 51.8. The outlook of European institutional investors also improved, as their confidence reading rose 6.7 points from 66.3 to 73.0. Asian investors maintained the increase in confidence that they displayed in December, and their Index fell only slightly from 86.6 to 86.3.

Developed through State Street Global Markets' research partnership, State Street Associates, by Harvard University professor Ken Froot and State Street Associates Director Paul O'Connell, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors. The index is based on financial theory that assigns precise meaning to changes in investor risk appetite, or the willingness of investors to allocate their portfolios to equities. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.

"The move up in Global Investor Confidence this month is the largest we have seen since August 2007," said Froot, in a press release. "This is perhaps not surprising, with the Index having registered a record low in December. While institutions looked more favorably on risky assets this month than they did at any time in the fourth quarter of 2008, it remains to be seen whether these reallocations represent changes in long-term convictions about the value of those assets," he added.

"The rebound in confidence among North American investors is the most striking thing about this month's results," added O'Connell in the release. "The increase represents a substantial improvement in outlook. While some of the increase is attributable to risk reallocations going into the New Year, it may also be true that institutional investors perceive that the risk of systemic collapse has abated somewhat in the wake of recent policy actions," he said.