Investor Confidence Improves, But Economic Outlook Has Never Been Worse

State Street's Investor Confidence Index for February shows two months of improvement from late 2008 lows, mainly on an improvement in North American investor confidence. In Europe and Asia, however, investor confidence is still slipping.

Meanwhile, the economic outlook has never been worse, according to the Info Institute's survey of world economic conditions. Does this mean that investors fully discounted the deterioration in economic fundamentals with the global stock market lows last year? We don't think so, as global stock market indices are again testing last year's lows. The DJIA and DJ transports have broken through these lows, as have the S&P Sector SPDR financials (XLF), utilities (XLU), consumer staples (XLP) and industrials (XLI), as well as the European Top 100 stock index, the French CAC 40, and the German DAX Composite.

The indices still above last year's lows are; the S&P 500, the NASDAQ Composite, the S&P Sector SPDR materials (XLB), health care (XLV) and technology (XLK) as well as Japan's Nikkei 225 and the UK's FTSE100 indices. It could only be a matter of time before these indices break down to new bear market lows as well.