State Street Markets report highlights resilient investor sentiment amid shifting allocations

By Newsdesk

September 08 2025
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In a climate of evolving global financial landscapes, State Street Markets has released its latest institutional investor indicators, revealing a sustained positive sentiment across the investment spectrum through August. The State Street Risk Appetite Index maintained its position in positive territory, marking the fourth consecutive month of upbeat investor sentiment, despite potential headline risks that loomed over the month.

State Street Markets report highlights resilient investor sentiment amid shifting allocations

Timothy Graf, Head of EMEA Macro Strategy at State Street Markets, elaborated on the findings, stating, “Despite rising challenges to US central bank independence and a renewed focus on sovereign fiscal policies, our broad measures of risk appetite continued to show resilience and positivity through August. Equity markets made new all-time highs just before month end and volatility measures continue to drift lower.”

The report highlighted that while there was a slight dip in long-term investor allocations to equities from the post-global financial crisis highs earlier in the year, these adjustments were minor and did not significantly alter the broader risk-taking behaviour. Graf noted, “Investors have a solid Q2 earnings season, especially from the all-important tech sector, and a modest, dovish pivot in Fed communications to thank for these positive catalysts. Within the month, the weight to equities, the riskiest class of assets, did drop a touch in favour of cash and bonds. However, this shift is a modest adjustment to what is still a large overweight and not enough to derail the risk-seeking message across the broader suite of institutional flow indicators.”

Delving deeper into the specifics, the report pointed out that USD selling remains a prominent feature of the flows, although USD holdings now exhibit a significant underweight that investors should consider in the coming months. Graf explained, “Digging deeper, USD selling remains a risk-positive mainstay of our flows but USD holdings do now show a pronounced underweight worth bearing in mind in the coming months.”

The report also noted a notable trend towards riskier commodity currencies and a growing interest in emerging market equities, particularly in Asia. “In equity markets, the US remains the largest country-level overweight by some distance, but August saw a continued uptick in interest in riskier emerging market shares and a slight paring of the US overweight. Flows into Chinese equities were particularly strong and continue a pattern of greater interest in Asia this month, as well as in emerging market versus developed market equities more broadly,” Graf added.

Despite these shifts, the demand for US Treasuries remained lukewarm, as did the overall appetite for duration, suggesting a cautious approach to longer-term investments. Graf concluded, “Finally, demand for US Treasuries remains tepid, as does the overall appetite for duration.”

These insights from State Street Markets offer a comprehensive view of the current investment climate, highlighting a cautious yet optimistic approach among institutional investors. The continued positive sentiment, coupled with strategic adjustments in asset allocations, underscores the dynamic nature of global financial markets as they navigate through geopolitical and economic challenges.

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