Geopolitics, surging energy and other prices spooked investors in all major developed regions during February.

Surging energy prices and worries about intense fighting in Ukraine hit global investor sentiment in February, with Europe leading the decline, a monthly snapshot of investors’ actual buying and selling behavior shows.

The State Street Investor Confidence Index® (ICI) for March 2022 fell to 99.7, down 4.2 points from February’s revised reading of 103.9. The decrease was led by a 10.9 drop in the European ICI to 82.9 as well as an 8.2 drop in the Asian ICI to 88.7. The North American ICI also dropped 3.3 points to 103.1.

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 sentiment remained volatile, with a decline in March reversing some of the prior month’s gains, pushing global sentiment toward 12-month medians," Marvin Loh, senior macro strategist at State Street Global Markets, said. “Intensified fighting in Ukraine, rising commodity inflation and continued hawkish rhetoric from central bankers all combined to curb investor enthusiasm. As anticipated, Europe saw the largest drop, weighed down by its proximity to the conflict along with uncertainty over energy deliveries from Russia.”

“In contrast, the decline in North America was somewhat moderate in comparison, while Asia readings were complicated by the recent surge in Covid cases. Idiosyncratic factors are likely to continue affecting regional performance until greater clarity on the conflict and its impact on inflation are better understood,” Loh added.