The past week of trading was extremely nerve-wracking for investors. How will it go on?
(Photo: dpa)
Dusseldorf Investors are optimistic about the future. But they do not rule out whether the prices will slide again before the rally continues. This attitude can be derived from the current Handelsblatt survey Dax Sentiment.
The survey participants recognize that the situation has improved significantly in the past two weeks. They are convinced that the economic recovery will continue in the coming year.
But in the short term there are many uncertainties that could cause a further setback on the stock markets: The new Omikron virus variant has the potential for renewed greater contact restrictions – worldwide. In the opinion of sentiment expert Stephan Heibel, who evaluates the weekly Handelsblatt survey, “smoldering conflicts over Ukraine and Taiwan could escalate at any time”. If the economy does not recover, the central banks now have far fewer opportunities to intervene.
On the one hand, the old stock market proverb applies: “Stock exchanges rise on a wall of fear.” That means: Anyone who is afraid of a price slide has already sold. That is why the many uncertainties do not have to go away in order to give the market a boost. It is enough for the worries to diminish a little and the market to rise.
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“When these fears evaporate, the Dax will be significantly higher, maybe even reach a new record high,” explains the sentiment expert. But who can say whether one of these conflicts will break out again and cause a crash on the stock markets?
On the other hand, the large number of neutral investors suggests that once a direction has been taken on the stock markets, further support will be received. So there isn’t one factor that, if resolved, would catapult the stock markets northward.
Rather, the stock markets are likely to continue to rise in a volatile manner and thus attract more and more neutral investors into the market, who ensure that prices continue to rise with their purchases. However, any publication of economic data pointing to high inflation and any escalation of the conflict over the countries of Ukraine and Taiwan is likely to trigger at least another brief sell-off. Not to mention the foreseeable utilization of the intensive care units by corona patients.
Heibel’s conclusion: investors have to be brave if they want to invest now. And they have to secure their investments well in the event a conflict should escalate.
Current survey data
Investor sentiment jumped sharply to plus 0.8. In the two previous weeks, dejection about the uncertain outlook dominated among investors, now the mood is neutral again.
The Dax was able to get a big weekly plus this week due to the decreasing fear of the omicron mutation. It was only two weeks ago that the Dax threatened to slip below the 15,000 point mark, which could have resulted in a tangible crash. But this risk seems to have been averted for the time being, and investors can breathe a sigh of relief.
Accordingly, the strong uncertainty of the previous week has almost completely disappeared with a minus of 5.7. The current value is at minus 0.7. While investors complained in the two previous weeks about their high investment quota, which could have been expensive in the event of a crash, this fear is disappearing and giving way to a neutral stance.
The future expectation on the Dax in three months remains at a very high level with a value of plus 3.7. So optimism about the future continues to dominate. Although the leading German index was able to gain three percent in the past week. The willingness to invest has risen further to plus 2.6 and, together with the great optimism for the future, gives the stock market healthy support.
The Euwax sentiment of the Stuttgart Stock Exchange, on which private investors trade, continues to be quoted at a slightly optimistic value of plus four. If the values are positive, there are more long than short leverage products in private customers’ portfolios. Accordingly, this group of investors is currently willing to take risks.
A surprising turnaround can be seen in the USA: The put / call ratio of the Chicago futures exchange CBOE has jumped sharply this week and shows a clear decline in call purchases. This means that the put / call ratio is still trading in a range that signals a bullish orientation on the part of investors, but the extremely bullish condition of the previous weeks has come to an end.
US fund investors have reduced their investment ratio by 19 percentage points to just 69 percent. Up until two weeks ago, the investment quota was for a longer period of time at 100 percent, most recently even over 100 percent due to the purchase of securities on credit. Fund investors are therefore becoming more cautious and preparing for the fact that the Omikron correction is not yet over.
US private investors are neutral, bulls and bears are in balance. But both camps house only a few piers. At 40 percent, the proportion of neutrals is significantly higher. This group of investors usually waits for a directional decision and then tries to profit from the new trend.
The “fear and greed indicator” of the US markets, calculated using technical market data, shows moderate fear with a value of 33 percent. The extreme fear of the previous week has also vanished from a technical point of view.
There are two assumptions behind surveys such as the Dax Sentiment with more than 6,000 participants: If many investors are optimistic, they have already invested. Then there are only a few 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 prices.
Would you like to take part in the survey? Then you will be automatically informed about the start of the sentiment survey and sign up for the Dax Sentiment newsletter. The survey starts every Friday morning and ends on Sunday noon.
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