A market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf Despite the significant losses on the German stock market, sentiment expert Stephan Heibel sticks to his assessment of the previous week: It’s too late to sell. “Stocks with high dividends, share buyback programs, and decent cash flow are buyable now,” he says.
Compared to the previous week, the investment ratio has fallen further, while the cash ratio has risen in return. However, the short rate has also jumped. This means: some investments in the past few days were obviously speculation on further falling prices. This is also partly the reason for the price losses.
In the meantime, the development of sentiment values in the Handelsblatt survey Dax-Sentiment shows historical dimensions. Investor sentiment has been negative for 26 weeks in a row. This is the longest uninterrupted period of negative sentiment since the survey began in fall 2014.
The five-week sentiment also shows an extremely low value. This indicator has so far accurately predicted every bottom formation.
Top jobs of the day
Find the best jobs now and
be notified by email.
Whether a sustainable bottom of the entire bear market since the beginning of the year is currently formed or only an interim bottom with a bear market rally will become apparent later on in the stock market. In Heibel’s view, it depends on the development of the interest rate market, the Chinese lockdown measures and the further course of the war in Ukraine.
In the similar AnimusX survey, which has a longer history than the Dax sentiment of the Handelsblatt, such negative values for the five-week sentiment were only reached during major upheavals on the stock market: the financial crisis in 2008, the Greek bankruptcy crisis in 2011 /2012, the euro crisis in 2015 and during the corona crash in March 2020. If prices continue to fall this week, which would result in an even worse mood, the five-week sentiment could even exceed the extreme value of the corona crash.
Also read on the topic:
That would be an unusual development. During the corona crash, the leading German index fell by 40 percent. There was a doomsday mood. This year, however, the German stock market barometer fell by only around 23 percent. And despite the Ukraine war, at least in this country, the atmosphere is not similar to what it was then.
Especially since there are signs of relaxation in the other negative factors for the markets. Inflation seems to have peaked, and the strict lockdown measures in China are also being relaxed, and the economy in China is growing again.
Only in the case of the Ukraine war is there no solution in sight. At the moment, it is not the diplomats who have the floor, but the defense ministers and NATO.
Current survey data
Investor sentiment has fallen back to pre-war levels. Dejection is spreading, especially because just a week ago there were hopes of a somewhat more sustainable recovery and these hopes were dashed early.
Investor sentiment fell to minus 7.3 from minus 6.5 the previous week. The five-week average is also extremely negative. Whether it’s the euro crisis, the corona crash or the dispute in the US Congress at the end of 2018 about capping the budget: in the past, excessively negative mood values have been used to describe a bottom on the stock markets.
The uncertainty among investors has also jumped up again accordingly. The value of minus 7.7 (after minus 5.9 in the previous week) shows how tense the nerves of investors are. Expectations for the future also remain pessimistic at minus 0.9 (previous week: minus 1.6). The survey participants obviously no longer have any reason to hope for rising prices in three months.
Nevertheless, the willingness to invest remains surprisingly high with a value of plus 2.0. As in the previous week, some investors are waiting for the final sell-off to use their cash reserves. “I am surprised that the developments on the interest rate market, where inflation has passed its peak, and in China, where the lockdown is slowly being rolled back, are not reflected more strongly in future expectations,” says sentiment expert Heibel.
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, has jumped to plus eleven. Such a high value indicates a clear overhang of call products compared to put products. So private investors are currently very bullish. The value is at its highest level in the past twelve months.
Private investors who buy financial products at Eurex are obviously already one step further and are positioning themselves extremely bullishly. It’s been a year since we’ve seen such bullish behavior on the part of private investors at Eurex.
Institutional investors who trade on the Frankfurt Futures Exchange also show an increased interest in long-term or long-term speculation. The put/call ratio is down to 1.2, but significantly lower compared to retail investors.
The put/call ratio of the Chicago futures exchange remains relatively high, and people on the other side of the Atlantic are obviously skeptical about future stock market developments.
US fund investors have increased their investment quota from 19 to 31 percent. The extremely low share quota of the previous week was increased a little in the weak prices of the past few days.
The bull/bear ratio of US private investors rose to minus 24 percent, the extreme value of minus 30 percent in the previous week could not be maintained in the USA. Although the proportion of bulls has only increased from 18 to 23 percent, the bears have left the camp en masse. This value has fallen from 59 to 47 percent. The US markets’ fear and greed indicator, calculated using market technicals, continues to show extreme fear.
There are two assumptions behind surveys such as the Dax sentiment with more than 7000 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 automatically informed 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.
More: Investors make these ten mistakes from the point of view of stock market psychologists