Institutional investors turn more cautious as State Street risk gauge slips to neutral
A closely watched measure of global risk appetite from State Street eased to a neutral reading in October, as institutional investors shifted toward defensive sectors despite global equities hitting fresh highs.
State Street Markets said its Risk Appetite Index, based on real trading flows among large institutions, slipped from its most optimistic level of the year to a neutral stance. The move does not indicate outright risk aversion, the firm said, noting that equity allocations actually climbed to their highest in 18 years:
- the overall backdrop remains constructive
- investors are becoming slightly more cautious in how they position within portfolios
- hift in relative trades and intra-portfolio allocations has driven index back to neutral
The moderation in sentiment comes as some investors question whether lofty valuations in AI-linked Big Tech stocks can be sustained.
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The moderation in State Street’s risk gauge hints at a rotation from growth to defensive sectors amid valuation concerns in AI-heavy Big Tech, suggesting near-term consolidation in global equity markets.
(Don’t tell anyone but there is a case to be made for investor turning neutral, ie trimming holdings, leaves room for stocks to rise further as some get forces to chase.).
This article was written by Eamonn Sheridan at investinglive.com.