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By Jennifer Yousfi
The State Street Investor Confidence Index for December 2007, released yesterday (Tuesday), fell 9.9 points from November's reading to reach 65.9 – the lowest level since the index began in 1998.
The index is compiled by State Street Global Markets, the investment research and trading arm of State Street Corporation (STT). It represents institutional investor activity in more than 45 countries, encompassing more than 22 million transactions annually. The index is made up of three underlying regional components: North America, Europe and Asia-Pacific.
The North American region – which includes Canada and the United States – had the most negative outlook, as investor confidence reached a historical low of 65.3 in the region. In contrast, European and Asian confidence remained stable, with only slight changes from the prior month.
"This month, our quantitative measure of global investor confidence established a new low, cementing the evidence that investor risk appetite has been strongly impacted by the one-two punch of the August and November credit crises," index co-founder Ken Froot, a Harvard University professor, said in a statement.
Investor confidence is measured by a willingness to invest in equities and take on risk. Faced with volatile markets, North American investors are looking for investments they preceive as safer and higher-quality, such as gold and U.S. Treasuries.
"The North American pessimism is mirrored almost exactly in the behavior of U.S. Consumer Confidence over recent months, the first time since 2003 that we have seen such congruence," said State Street Associate Director Paul O'Connell.
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