Dusseldorf For the sentiment expert Stephan Heibel, the stock markets are currently in the “calm before the storm”. In his opinion, it can be concluded from the results of the current Handelsblatt survey Dax-Sentiment that a strong impulse is imminent. “However, no direction can be derived,” says Heibel.
In the case of wise decisions by politicians and the central bank, there could well be a run to new all-time highs for the leading index Dax. But it is just as likely that past mistakes will be repeated and equity markets will break to the downside. “So May promises a lot of price movements without the direction being clear,” explains Heibel.
The Dax is just below its record high of 16,290 points, although the situation is getting worse. In the US, the banking crisis continues, the collapse of the First Republic Bank and the problems at Pacwest are still having an impact. Uncertainty is high – market observers fear that a bank run could happen again.
The four major risks for investors
With regard to monetary policy, the central banks must decide either to fight inflation and thus accept a weakening of the economy, or to support the economy in the short term and thus risk inflation rising again.
At the same time, the US government is threatened with default because the debt ceiling will soon be exceeded. Almost a US ritual for which a solution has regularly been found in the past. However, on the way to a solution, the US stock exchange barometer S&P 500 fell by 16 percent from the end of July to the beginning of August in 2011, for example. At the beginning of August 2011, the Dax lost more than 25 percent in value within just seven trading days.
There are solutions for all four of the current major risks – bank run, inflation, economic weakness and the US debt ceiling. Accordingly, investors rely on clever decisions by the players and wait and see.
“The majority of investors are hoping for a rescue from the central banks, as has been seen again and again in recent decades,” explains the sentiment expert. In this case, interest rate cuts would provide short-term relief.
Current survey data
However, some market participants recognize that such a short-term solution is neither sustainable nor can central banks implement it. Many investors have used the recent violent price fluctuations to adjust their portfolios to the tense market situation. “But the adjustment of the portfolios was done half-heartedly, because you have simple solutions for the various problems in mind,” explains Heibel.
Investor sentiment fell to 0.7 from 1.0 the previous week. The good mood of the past few weeks has clouded over, and investors are currently in a wait-and-see attitude. Slight uncertainty is spreading, complacency has fallen to minus 0.6 points.
A clear majority expects prices on the German stock market to fall in three months. The future expectation has fallen to minus 2.7 points.
But unlike in the previous weeks, investors see the first buying opportunities. The investment ratio has risen to plus 0.5 after being negative or at zero for the previous four weeks.
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, has risen to minus two percent and is thus approaching the zero line. The more negative this value, the higher the proportion of leveraged put products in investors’ portfolios. Investors have sold a large part of the protection against falling prices and are now waiting for the next steps on the stock markets.
Institutional investors, who hedge themselves via the Frankfurt futures exchange Eurex, have done the same. The put-call ratio stands at 1.8 percent and indicates that the professionals are currently neutral.
In the USA, too, the put-call ratio of the Chicago futures exchange also indicates a neutral positioning of institutional investors.
Fund managers are becoming bolder
US fund managers have slightly raised their investment ratio to 67 percent, so they are getting a little bolder again. US private investors, on the other hand, are at their most pessimistic since the banking crisis in March. The proportion of bears is 45 percent, only 24 percent are bullish. This results in a bull-bear difference of minus 21. The “fear and greed indicator” of the US markets, calculated using technical market data, shows a neutral condition with a value of 51 percent.
There are two assumptions behind surveys such as the Dax sentiment with more than 8,000 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.
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