With the exception of Europe, investors' behavior showed that they were more optimistic about the direction of markets in May.

A measure of global investors’ buying and selling habits shows that they grew more confident in May, with North American and Asian investors leading the way.

The Global Investor Confidence Index, issued by State Street Global Markets, part of State Street, increased to 97.9, up 5.4 points from April’s revised reading of 92.5. The rise in investor confidence was driven by a 6.0 point increase in North American Investor Confidence to 97.8. Asian Investor Confidence also increased substantially, rising 9.0 points to 100.8. The European ICI, however, dropped 1.2 points to 93.0.

The index measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.

“Investor risk appetite improved by its largest margin of the year in May, buoyed largely by reopening optimism on the heels of broader vaccination access, particularly in advanced economies,” Marvin Loh, senior macro strategist at State Street Global Markets, said.

“Rising yields, which had generated investor concern earlier this year, have been generally stable recently, contributing to positive gains in investor confidence in both North America, as well as Asia, even in spite of ongoing issues with vaccine rollouts in Asian countries. In contrast, European investors saw a slight contraction in confidence this month as gains on the vaccination front were met with slightly higher yields,” Loh said.