THE BIG MONEY IS TURNING BEARISH

State Street released their Investor Confidence Index for October 2009 which tracks the current level of institutional bullishness or bearishness.  According to State Street the index was “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.”   In other words, it uses money flows to gauge the level of bullishness displayed by institutional investors.  Over the course of the last two months investors have become substantially less bullish:

“This month, institutional investors have paused to take stock.  The Global Index reading of 108.4 remains comfortably above the neutral level of 100 for a seventh consecutive month, but underlying flows have been tempered somewhat from the very strong levels of July and August. While the US earnings season has been relatively robust so far, the number of positive surprises that have been observed in employment, retail sales, manufacturing and trade figures has diminished considerably, and this may be influencing investor risk appetite.”

“Looking at the underlying data by region, we have seen less interest on the part of North American investors to add further to their holdings of foreign equities, particularly Japan and the UK,” added O’Connell. “At the same time, non-US interest in US markets has picked up. It adds up to a mixed picture where institutional investors have become more discriminating in selecting target markets than was true over the summer, and are looking to balance country-specific prospects against the slow but steady improvement in the fundamental backdrop.”

Source: State Street