Investors are skeptical about rising stock market values ​​– and are waiting

Dusseldorf The leading German index, the Dax, has now recovered significantly from its low for the year. In the past week, the stock market barometer rose by 2.4 percent and defended this level on Monday. However, the mood does not keep up with the price increase, according to the Handelsblatt survey Dax-Sentiment among more than 7500 private investors.

Although investor sentiment is rising to minus 2.9 – this value was still minus 7.5 at the end of September – it remains in negative territory. Uncertainty fell from minus 6.8 to minus 2.0 in the same period. Here, too, skepticism remains high. At the same time, there is no optimism: the future expectation is 0.1.

This shows that investors do not trust the price increase, says sentiment expert Stephan Heibel: “The absolute stressful situation of the previous weeks is disappearing slightly, but hardly any bulls dare to enter the arena.” “Bulls” are referred to on the stock exchange as investors who are believe that prices will continue to rise.

Instead, Heibel observes that “bears” continue to dominate the market – meaning pessimistic investors. They would wait for the right moment to “go short”, i.e. to bet on falling prices.

This tactic has worked well for the past few months. Because every recovery rally was followed by a setback on the Dax: from 14,700 points in June to 12,400 points in July, from 13,900 points in August to 12,600 points in early September and from 13,400 points in the middle of the same month to the low for the year at 11,970 points.

This also explains the current reluctance of investors: Those who were not there when the rally started are now worried that they will enter too late and be caught by the next correction. Because the stress factors are still great with the Ukraine war, the energy crisis, the persistently high inflation, rising interest rates and the recession worries resulting from the mixed situation.

However, as Heibel explains, investors should bear in mind that all of these negative factors are already known and that many investors have prepared for them: “Sentiment theory speaks of the potential for surprises, which is therefore on the upside. Falling prices can no longer surprise investors in their current lousy mood. So any sell-off should end early.”

The managing director of the analysis company AnimusX assesses the situation on the upside differently: “Rising prices hold the potential for surprises. Initially, they are perceived as a new short opportunity. However, if prices continue to rise, many short positions could come under pressure. Compulsory buy-ins could then further fuel a rally that has started.” Appropriately, the willingness to invest is moderate with a value of 2.1. So there are investors who speculate that prices will continue to rise in the short term.

There was such a short squeeze at the end of September, for example, shortly after the Dax had reached a new low for the year. Many speculators then turned their bets into money, so that the Dax rose by more than 700 points within a week – supported by the announcement of bond purchases by the Bank of England.

situation in the bond market

The mood on the bond market is at its lowest point, explains Heibel: “Uncertainty about the sustained rise in interest rates is at its maximum. The first investors have already built up positions in bonds again after massive liquidations over the summer. Now there is no increase in bond prices and uncertainty is increasing. Hardly anyone has hedged against prices falling even further.”

Bond prices depend on monetary policy. When interest rates rise, investors expect new bonds to offer higher rates as well. They are therefore selling bonds that have been outstanding for some time. Their prices then fall, while bond yields rise in return.

“This means that we have an extremely negative mood, which is one of several prerequisites for a trend reversal. But the positioning of investors is too bullish to derive a trend reversal purely from sentiment theory,” explains Heibel. There is no monetary policy signal for this.

situation in the gold market

There has recently been a panic selling on the gold market. In the course of this, the price of gold fell below the psychologically and technically important mark of 1700 dollars. Most recently it was only around 1650 dollars.

But that could change soon, Heibel believes: “The future expectations for the gold price have turned positive. A strong counter-movement could soon start from the negative mood.”

There are two assumptions behind surveys such as the Dax sentiment with more than 7,500 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.

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