A market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf The speeches by the two US central bankers Lael Brainard and Mary Daly last week have changed the situation on the stock markets. The US Federal Reserve will probably even raise interest rates in several steps of 0.5 percentage points over the next few months and reduce its balance sheet total faster than expected. It had been inflated by huge monthly purchases of bonds and mortgage securities.
After the announcement, it’s no wonder that over the past week, highly rated stocks have sold off while value stocks, which are considered undervalued, have held up well. This is also reflected in the current values of the Handelsblatt survey Dax-Sentiment: There is a high level of uncertainty combined with growing optimism.
Investors are unsettled because there are still many growth stocks in their portfolios, says sentiment expert Stephan Heibel. He evaluates the survey weekly. Because over the past few decades, investors have learned that growth is more lucrative than value. Dividends have only played a minor role in recent decades, with stocks such as Apple, Amazon, Alphabet and Microsoft in demand. But hardly anyone wants to buy these shares anymore.
Therefore, the sell-off in the past week felt particularly painful, especially since many other titles, some of which had even been forgotten, made strong gains. However, optimism is high because historical sell-offs in growth stocks have often been an opportunity to buy.
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But after the speeches by the two central bankers, Heibel is no longer so sure whether this is the case now. Even after the sell-off, there is still potential for disappointment in growth stocks, while price increases in defensive stocks go largely unnoticed.
“I would invest very cautiously in the coming weeks and prefer defensive stocks,” says the sentiment expert. The sectors on the German stock market developed very differently in the past week.
The sell-off focused on the high-flyers of the corona pandemic. The logistics industry gave up 5.3 percent, commodity stocks collapsed by 3.4 percent. The technology sector and industrial companies lost an average of 2.5 percent. Weekly winners were defensive utilities, up 3.4 percent, followed by healthcare stocks and financial stocks, each up 0.2 percent on average.
However, the Dax did not reach a new low in the past week. Apparently the intensity of the fluctuations is decreasing.
Current survey data
The course of the week again created a clear sense of uneasiness among the survey participants. Investor sentiment has fallen to minus 2.9, indicating moderate despondency among investors. However, extreme values only start from a value of minus four.
The situation is similar when it comes to insecurity. The value of minus 1.9 reflects the uncertainty, but is still far from extreme uncertainty. Just as the future expectations fell from 1.1 to minus 0.4 in the previous week with rising prices, they have returned since the weekend at a lower price level. The current value is 0.7. The Dax only fell 1.1 percent in a weekly comparison.
The willingness to invest has increased slightly and, with a value of 1.7, is again showing a very high level. There are no extreme values here either, but just two weeks ago the cash quota was low. Since then it has only increased moderately, so there is still potential.
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, is minus 7.5 and indicates a very high propensity to hedge. It is currently more important for investors to protect themselves against further losses than to participate in any rising prices. Negative values indicate an excess of put versus call products on the Dax in private investors’ portfolios.
Put products, unlike call derivatives, appreciate when prices fall and are most often used to hedge against falling prices.
The situation is very similar for institutional investors who hedge themselves via the Frankfurt futures exchange Eurex. The put/call ratio of 1.9 still indicates a stronger interest in put protection than call speculation. But the extreme values from March, when the ratio jumped to a value of over five, can no longer be seen.
Put hedging has also declined in the USA, the put/call ratio of the Chicago futures exchange CBOE has fallen back to a neutral level.
US fund investors have further increased their investment ratio to 83 percent. Normalization has thus also taken place here, after only 30 percent of the funds had been invested for a short time when the war broke out.
The bull/bear ratio of US private investors, i.e. the ratio of optimistic investors (bulls) to pessimists (bears), is minus 17 percent. So bears dominate. As recently as a week ago, the bulls briefly regained the upper hand, but the optimism this signaled was very short-lived.
The US markets’ fear and greed indicator, calculated using market technicals, remains in neutral territory at 48.
There are two assumptions behind surveys such as the Dax sentiment with more than 6500 participants: If many investors are optimistic, they have already invested. Then only a few are left who could still buy and thus drive prices up. Conversely, if investors are pessimistic, the majority of them have not invested. Then only a few can sell and thus depress the courses.
Do you want to take part in the survey? Then let yourself be informed automatically about the start of the sentiment survey and register for the Dax sentiment newsletter. The survey starts every Friday morning and ends on Sunday afternoon.
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