Investors are losing confidence around the world as aggressive rate hikes increase market volatility, State Street data shows

Investor sentiment around the world took a hit in June, by one measure, with global stock markets ending a lousy first half through 2022.

State Street data showed a drop in global investor confidence in June after recovering in May, as central banks around the world set out plans to aggressively raise interest rates as they move from support for the economy during the COVID-19 pandemic to crush persistent inflation.

“While the latest round of rate hikes by central banks to stem inflation has led to increased market volatility of late, the impact on US investor confidence has been noticeably more subdued compared to earlier times. “other regions, with Europe and Asia seeing a steeper drop in sentiment,” Rajeev Bhargava, head of investor behavior research at State Street, said in a statement on Wednesday. recession due to a tricky combination of high levels of inflation, slowing business activity and an increasingly belligerent central bank is likely to be responsible for lowering confidence in Europe for the fourth consecutive month .”

According to fund manager State Street, the Investor Confidence Index (ICI) fell to 94.6 in June, down 2.6 points from May. The most notable drop was seen in Europe – a drop of 10.6 points to 57.6. The US ICI edged down 2.5 points to 97.1, and the Asian index fell 4.8 points to 88.8. The index measures investors’ risk appetite and is based on actual trading activity.

Read more: What’s next for the stock market after the worst first half since 1970? Here is the history.

The European Central Bank confirmed earlier this month its intention to raise its key rates by 25 basis points at the policy meeting in July, while expecting a further hike in September. Policymakers face challenges controlling inflation while responding to the economic slowdown resulting from Russia’s war in Ukraine and associated sanctions on Russian oil and natural gas.

The STOXX Europe 600 index FXXP00,
+0.12%
was down 6.22 points, or 1.51% on Thursday, the last trading day of the first half of 2022, while the FTSE 100 UKX,
-1.96%,
an index of major UK companies, fell 0.2%.

Read more: ECB says it will join the rate hike party, but analysts say there is little demand to crush

The S&P 500 SPX US Equity Benchmark,
-0.85%
entered a bear market during the week of June 13, falling more than 20% from its high of January 3. The index is heading for a historically lousy half-year performance as markets expect tighter monetary policy to rein in inflation but fear interest rates could hit levels that could trigger a recession. The S&P 500 was on course for its worst first six months of a year since 1970.

Earlier this week, a survey of US consumer confidence fell in June to a 16-month low of 98.7, as Americans grew more worried about high gasoline and food prices and the possibility of another recession.

The Dow Jones Industrial Average DJIA,
-0.90%
fell 170 points, or 0.5%, on Thursday afternoon as Wall Street staggered toward the finish line of a bearish first half. The S&P 500 SPX,
-0.85%
was down 0.5%. The Nasdaq Composite COMP,
-1.23%
fell 0.8%.

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