Investor sentiment in stocks, bonds and gold is historically bad

Bull and bear in front of the Frankfurt Stock Exchange

It is a market phase characterized by great uncertainty.

(Photo: dpa)

Dusseldorf The stock markets are currently not calming down. A look at the past week shows how volatile the situation is: the sabotage of the Nord Stream pipelines initially triggered a sell-off, bond purchases by the Bank of England then caused prices to rise before profit warnings from Nike, among others, weighed on the stock market again .

This is also reflected in investor sentiment, as the result of the weekly Handelsblatt survey Dax sentiment shows. With a value of minus 6.9, the mood is slightly better than in the previous week (minus 7.5), but it can still be classified as depressed.

“This is an extreme level that we last saw shortly after Russia invaded Ukraine when it was minus 7.8,” says sentiment expert Stephan Heibel, who evaluates the survey for the Handelsblatt. “For comparison: In the corona crash, our previous historical extreme value was reached at minus 8.2. That level is not far off.”

The negative mood without a significant break has existed for so long that the five-week average has also reached a new extreme of minus 31.0, according to Heibel. Here, too, there was only one value in history that was even lower: the record of minus 32.1 was measured in the corona crash.

Top jobs of the day

Find the best jobs now and
be notified by email.

In the course of this, the important support zone of 12,400 to 12,600 points did not hold. Instead, the leading index Dax reached a new low for the year at 11,863 points on Wednesday, which at least held up during the next downward movement on Thursday.

graphic

However, Heibel is not sure that we have seen the lowest prices yet. “I would describe the current mood as fear without panic: All mood indicators show extreme values, but there is no panic on the market. It seems to me like a salamic rash, the shares lose value in slices without a final sell-off.”

A final sell-off describes a situation in which many investors dump their shares on the market regardless of the price, fearing even bigger losses. The prices drop significantly with high trading volumes. Since there are no other sellers who can drop prices for a longer period of time, this is often the end of a correction. As long as this final sell-off is missing, the markets remain in an intact downtrend with intermittent price recoveries.

In the past week, for example, many negative reports with comparatively small price losses were processed. A new low for the year was reached without panic selling. “In my view, this means that a recovery movement will run the risk of ending up as a flash in the pan,” explains Heibel.

Because as long as the panic sell-off is missing, too many investors are still invested, who get out again with moderate price gains. “Experience has shown that a floor usually only forms when these investors have also sold their positions and interest in the stock market is low,” Heibel continues.

At the moment, the uncertainty among the around 7,000 investors surveyed is high, with a value of minus 6.6, but not yet high enough. For more than half of them, the expectations in the past few weeks have not been met at all or have only just been met. “There is still room for improvement here, because the corona crash reached a value of minus 12.3,” says Heibel.

Expectations for the future are also bad. Over half of respondents believe markets will still fall or bottom out three months from now. Only 16 percent expect prices to rise. With a value of minus 0.9, the mood is not exceptionally bad.

The willingness to invest, on the other hand, is slightly positive at 1.6 percent. After all, every fourth respondent states that they want to buy next week.

The Euwax sentiment of the Stuttgart Stock Exchange is interesting: It shows whether private investors are more likely to bet on a rising or falling Dax. It is currently surprisingly neutral at just minus 2.5. “Neither hedging transactions nor speculation on rising prices are worth mentioning. Is that the disinterest that is typical at the end of a bear market?” asks Heibel.

Professional investors, on the other hand, protect themselves against falling prices. The put/call ratio on the European derivatives exchange Eurex, which shows the ratio of bets on falling prices (put options) to bets on rising prices (call options), jumped to 3.8. The situation is similar in the USA on the Chicago futures exchange CBOE, where the put hedges are also at a high level.

Meanwhile, the investment ratio of US fund managers has fallen to a record low of 13 percent. “US fund managers have fled the market and are now waiting on the sidelines with high cash reserves,” observes Heibel. Among US retail investors, over 60 percent are pessimistic for the second week in a row.

Look at other asset classes

  • bond market: The five-week sentiment for the Bund future is at its lowest level since 2007. “When the real estate crisis burst, the mood on the bond market was just as negative as it is today. There is practically no willingness to invest anymore. The target prices at which purchases are to be made are well below the current level,” says Heibel. The financial markets are trying to anticipate how far the central banks will raise interest rates. In line with these expectations, bond yields rise and prices fall. “When this merciless sell-off ends and interest rates stabilize, this will also have a positive effect on the stock markets,” says Heibel. “And if I look at the extreme values ​​on the bond market, then stabilization at the low price level that has now been reached, i.e. high yield level, is quite possible in the coming days.”
  • Gold: The five-week moving average in gold sentiment has also reached an all-time low. “Since we started this survey in 2005, sentiment in the gold market has never been so bad,” explains Heibel.
  • Oil: The mood on the oil market is also bad, but the values ​​were even more extreme when the oil price was negative during the corona pandemic. “Even at the end of 2018, when US Federal Reserve Chairman Jerome Powell surprisingly raised the US key interest rate once too much, sentiment on the oil market was even worse than it is today,” says Heibel.

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

source site-15