State Street Global Markets on 6 October released their institutional investor indicators--which include the and the --for the month of September.
State Street’s risk appetite index, which looks at investors’ aggregate buying and selling activity, fell from 0 to -0.18. A positive reading suggests that investors, on balance, are adding to risk exposures, while a negative reading suggests risk reduction. September’s index shows that long-term investors reduced risk across asset classes during the month.
“As bond markets sought to fully price in higher for longer rates from the Federal Reserve and equity markets wobbled, we saw a classic risk off response from long-term investors. There was a sharp rise in allocations to cash, stronger demand for the US dollar and significant outflows from cyclical and emerging market assets,” said Michael Metcalfe, head of macro strategy at State Street Global Markets, in a .
“Investors are hiding in cash”
State Street’s holdings indicators for September showed that long-term investors’ cash allocations rose 0.3% to 20.4% and fixed income allocations rose 0.2% to 28.5%. Equity holdings, on the other hand, fell by 0.5% to 51.1%.
“Investors are hiding in cash once again in the face of combined equity and fixed income market weakness. While cash holdings are now above average, we would caution they remain a few percentage points below their normal crises peaks,” said Metcalfe.
“Holdings of equities look to be especially vulnerable as allocations to equities are still above their long-run averages, while holdings of bonds are already at their lowest levels in 15 years,” noted Metcalfe in State Street’s press release.
Their monthly holdings indicator “shows the aggregate holdings of institutional investors across three asset classes: stocks, bonds and cash,” explains State Street. Changes in this indicator are due to “changes in the relative valuations of asset classes or investor flows (trades) that reallocate portfolios across asset classes.”