The SVB bankruptcy shocked investors.
(Photo: dpa)
Dusseldorf The recent price slide at Deutsche Bank has stalled the recovery attempt on the stock market. Investors take it surprisingly calmly: Their mood has improved over the week, as the result of the Dax-Sentiment survey by the Handelsblatt shows almost 8,000 private investors.
In the past week it was the decline of the major Swiss bank Credit Suisse and a possible European banking crisis that occupied the survey participants. Investor sentiment was on the verge of indicating fear and panic. Now it rose from minus 3.4 to minus 1.9.
That may surprise. There was a solution for Credit Suisse in the form of a takeover by competitor UBS. But the credit default insurance (CDS) for Deutsche Bank bonds shot up and the institute’s share price collapsed by up to 14.9 percent.
Investors are far less unsettled by this, observes sentiment expert Stephan Heibel. “You have seen at Credit Suisse that there is a solution where customer deposits are saved,” says the managing director of the analysis house AnimusX. “Perhaps it has already been realized that only the CDSs were hyped at Deutsche Bank today without the bank actually being in trouble.”
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The improved investor sentiment is already reflected in share prices – after all, the leading German index Dax rose by a total of 1.3 percent last week despite the significant losses on Friday. Heibel still sees further potential: “The relief that there will be no further failures could further drive the recovery that has begun.”
The reasoning behind this is that many investors are still cautiously positioned in anticipation of further problems in the banking sector. If the feared bad news does not materialize, these investors would become bolder again and become potential buyers. Heibel therefore sticks to his statement from the previous week: “The stock markets should recover after the extreme stress situation.”
In doing so, he relies on the latest survey results, which indicate not only improved investor sentiment, but also a decline in uncertainty. In the previous week, the corresponding value was still at the multi-month high of minus 7.7. Now he improved to minus 5.1.
However, the survey participants are more skeptical about the future: the group of those who expect the leading index Dax to rise in three months’ time shrank by two percentage points. You switched to the group of those who anticipate falling prices. As a result, future expectations slipped from plus 0.6 to plus 0.1.
“Investors obviously fear another wave of sell-offs,” concludes sentiment expert Heibel. “But that should then be used for purchases if I interpret the survey correctly.” Because the willingness to invest is still high at plus 1.6 (previous week plus 2.4). More than one in five wants to buy shares in the next two weeks.
However, Heibel also points out that the risk of a deeper price slide has grown. “The composure with which today’s turbulence is being taken up could quickly change if another bank actually gets into difficulties,” warns the publisher of the market letter Heibel-Ticker.
This is because private investors are currently less hedging against price risks. This is shown by the Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade. While an extremely large number of hedging products against falling prices were still being bought at the beginning of February, this propensity to hedge has recently declined.
The Euwax sentiment is currently plus one and thus indicates neutral behavior. Investors therefore buy slightly more call options, with which they benefit from rising prices, than put options, which increase in value when prices fall. At the beginning of February, the value was still minus 18.
The put-call ratio of the European derivatives exchange Eurex, which institutional investors use to hedge themselves, also shows a neutral behavior with a value of 1.6. A significant price slide could therefore surprise both professional and private investors.
location in the United States
In the USA, too, the propensity to hedge has declined. The put-call ratio on the largest futures exchange in Chicago shows that investors are neutral.
Meanwhile, fund managers remain cautious. Their investment ratio has risen slightly to 53 percent, but remains comparatively defensive.
Sentiment among private investors remains poor. The group of pessimists, called “bears” on the stock market, is 28 percentage points larger than the group of optimistic bulls.
The technical “fear and greed indicator” of the S&P 500 shows fear at 31 percent, but extreme values are only reached below 25 percent. The S&P 500 Short Range Oscillator has recovered to a moderate minus 1 percent.
Other asset classes
Gold: The precious metal has benefited from the recent turbulence thanks to its image as a supposedly safe haven. In the meantime, the price per troy ounce was over 2000 dollars.
“The mood regarding the gold price development is good, party mood prevails. In the past, similar exuberance has resulted in a small setback over a four-week horizon, but after six months gold prices were up an average of five percent.
Oil: Concerns about a possible banking crisis and its impact on the global economy caused the price of oil to collapse further. Investor sentiment and future expectations are correspondingly poor here, reports Heibel.
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From the point of view of sentiment theory, this indicates a possible trend reversal. “Especially when there were correspondingly pessimistic expectations for the future, a strong oil price rally usually followed in the past,” says Heibel. 34 times in the past, pessimists’ expectations were as strong as they are now, or even stronger. On average, this was followed by an oil price increase of 25 percent in six months – although the oil price was also eight times lower afterwards.
Bitcoin: The best-known and oldest cryptocurrency has recently risen sharply. Their supporters explain this with the function as “digital gold”. However, the price has recently moved more like a risk asset in opposition to interest rate expectations. The mood is definitely good – which is a warning signal from the point of view of sentiment theory.
>> Read about this: Bitcoin on an “absolute high” – but US regulators are causing skepticism
“The mood is spilling over, the price rally of the past few weeks is creating a party mood,” says Heibel. “There has only been five such positive moods in the past. Each time it was followed by a sell-off, with Bitcoin losing an average of 24 percent over the next six months.”
There are two assumptions behind surveys such as the Dax sentiment with more than 7800 participants: If many investors are optimistic, they have already invested. Then only a few are left who can 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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