Sign Up
Login

Institutional investor risk appetite hits five-year high

Written by Natalie Tuck
08/08/2025

Institutional risk appetite continued to climb in July, with the State Street Risk Appetite Index rising to +0.54 – its highest level since November 2020.

Reflecting this broad risk-seeking trend, institutional investors increased their allocation to stocks by 0.7% in July, reaching 54.8%. This marks the most bullish equity allocation since November 2007, underscoring a broader shift toward risk-seeking behaviour.

The index measures investor confidence by analysing buy-sell patterns across US$44trn in assets under custody and administration, spanning 22 risk dimensions across equities, FX, fixed income, commodities, and broader asset allocation.

State Street Markets head of macro research, Michael Metcalfe, said the rise in confidence comes in contrast to the “numerous potential pitfalls” for financial markets in the third quarter, highlighting that institutional investors remain optimistic.

“Their aggressive buying of risky assets mirrors the fervor seen in November 2020, when COVID vaccines were announced. This suggests that investors believe the peak of uncertainty, whether geopolitical or policy-related, has passed,” he said.

Striking a more hesitant tone, he added that the “stark contrast” between investor confidence and the ongoing decline in business confidence, especially in the US, is “concerning”.

“Our data shows that equity allocations are near their highest levels in 25 years. The only times they were higher were during the dot-com bubble and the global financial crisis, serving as a caution that today's buoyant sentiment could be vulnerable to shocks.

“Beneath this overall optimism, there are intriguing nuances. Investors continue to favour US consumer discretionary stocks, hinting at potential disruptions to their growth outlook. Robust cross-border flows in July were concentrated in Japan, China, and Brazil, indicating a shift towards global growth rebalancing," he said.

In contrast, weak demand for Indian equities, Metcalfe noted, reflects lingering tariff and policy uncertainties.

"Fiscal concerns persist, with foreign demand for Treasuries, Gilts, and OATs remaining weak," he said.

Meanwhile, sentiment toward the US dollar stabilised in July after five months of consistent hedging – suggesting investors now see policy uncertainty as having peaked.



Share Story:

Related Articles

  There are no related documents to show at this time.

MetLife

Schroders Global Investor Insights Survey
Adam Cadle talks to Debbie McKay, Insurance Strategist on the themes uncovered in Schroders’ global survey of 200+ insurance companies

BANNER

BANNER

Navigating insurance investment
Adam Cadle talks to Aon partner, Geoff Bauer, about how the firm helps insurers to achieve their objectives
Most read stories...
Understanding Capital Solutions
Adam Cadle talks to HSBC Asset Management’s head of capital solutions, Borja Azpilicueta, and head of insurance business, Deepak Seeburrun, about the firm’s capital solutions proposition.
World Markets (15 minute+ time delay)

Absolute Return Fixed Income roundtable

Pictet-roundtable

European insurance companies renumeration

European Loans roundtable

BNP Paribas roundtable

ETFs roundtable

Iame roundtable May 2018