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State Street Global Markets releases results of State Street Institutional Investor Indicators

Ashley Lo
Ashley Lo • 2 min read
State Street Global Markets releases results of State Street Institutional Investor Indicators
Despite equity markets hitting new highs, long-term investors are getting increasingly cautious, says Michael Metcalfe. Photo: Bloomberg
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State Street Global Markets has released the results of its State Street Institutional Investor Indicators, as announced on July 9. 

According to the indicators, the State Street Risk Appetite index has fallen back to -0.09 in June, revealing a modest risk-off bias for the month. 

Despite equity markets hitting new highs, long-term investors are getting increasingly cautious, explains Michael Metcalfe, head of macro strategy at State Street Global Markets. 

“After the recent moderate improvement in risk appetites in 2QFY2024, institutional investors rushed back to cash in June as a combination of positioning, political risk and cyclical doubts challenged views in both equity and bond markets,” he adds. 

In spite of fading investor optimism towards Chinese equities following flows falling back from above to simply average levels, long-term investor inflows into other regional markets such as Korea, India and Indonesia have not been similarly deterred. 

Metcalfe also highlights that although the US is set to face political event risk later this year, the indicators have shown that the US dollar continues to remain a safe choice for investors in the face of event risk. 

See also: Interest rates, valuations, REITs, the US election, volatility

“Long-term investor demand for the US dollar rebounded smartly in June, alongside demand for the utilities sector in equities and cash more generally,” says Metcalfe.

Additionally, the State Street Holdings Indicators have shown that long-term investor allocations to equities have fallen 42 basis points (bps) to 53.2%. Similarly, allocations to fixed income have also fallen 46 bps to 27.5%, which reflected a rise in cash holdings by 88 bps to 19.3%. 

This marked the largest rise in cash holdings since last August. 

“Just a month ago we speculated whether long-term investors would tolerate their cash holdings falling below their long-term average given ongoing event risk. June provided a definitive answer to this,” notes Metcalfe. 

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