Investors see the price level as a buying opportunity

Dusseldorf The war in Ukraine created two completely different extremes for private investors: a mood of panic with complete insecurity contrasted with exuberant optimism about the future coupled with a very high willingness to invest. This shows the latest evaluation of the Handelsblatt survey Dax sentiment.

Last week’s stock market crash had a major impact on investor sentiment. The Dax had meanwhile fallen to 13,800 points and was eight percent down on a weekly basis. The dynamic situation in Ukraine is accompanied by high volatility on the stock markets.

The mood among investors has turned to panic. With a value of minus 5.4, sentiment is worse than it has been for over a year. The uncertainty among investors has even fallen to minus 9.5: Investors were last so unsettled during the corona crash in March 2020.

At the same time, however, future expectations have jumped to plus 3.7. Values ​​above 4.0 signal exuberant optimism. “Unless there is a further escalation, the prices should have reached a panic bottom,” says sentiment expert Stephan Heibel, who evaluates the analysis for the Handelsblatt.

This attitude can also be seen in the willingness to invest, which has actually jumped to an extremely positive level with a value of 5.0. There was also a similarly high willingness to invest in March 2020. “It seems that investors think the current prices on the stock markets are too cheap and see them as buying prices,” says Heibel.

The owner of the analysis house AnimusX is not an expert in assessing wars, but he believes that Russia could announce that it has Ukraine under its control in a few days. “As tragic as this may be for the people of Ukraine, the stock market would initially breathe a sigh of relief if this could prevent worse bloodshed,” says Heibel.

In the short term, the development of the stock market will be determined by the events in Ukraine. But the current courses are the result of maximum panic and uncertainty. “It is reasonable to assume that the current level is lower than a valuation level called when the consequences of Putin’s horrific acts are soberly weighed,” he said.

The conflict is also having a massive impact on prices on the crude oil market. The price of oil has risen sharply in the past few weeks – during the period in which Russia has moved its military to the Ukrainian border: from 65 dollars per barrel to over 100 dollars for the US variety WTI, and very similarly for the North Sea variety Brent. The mood has risen continuously during this time and has been in the realm of absolute euphoria since the beginning of January.

Now, however, the basis for a further price increase is missing. From a sentiment standpoint, gains are capped for now – a retracement towards $80 a barrel is currently more likely than a continuation of the rally towards $120.

The price of gold, on the other hand, has only started its rally in the past few days. The mood related to the precious metal has risen sharply, but the speculation on a rising gold price is still young. The five-week average is still in neutral territory and thus allows the gold price rally to continue from a sentiment point of view.

More about the markets in the Ukraine war:

The Euwax sentiment of the Stuttgart stock exchange, where private investors trade, shows a comparatively neutral attitude with a value around zero. Positive values ​​for this indicator indicate an excess of call versus put products in the portfolios and vice versa.

The recent drop to the current level shows that investors have dissolved their long speculation of the past few weeks. Since the Euwax sentiment reflects transactions with leverage products on the Dax, this reflects the actual behavior of private investors over the past few days: Many panicked and threw their shares onto the market, causing the sell-off.

The pros who, a week ago, hedged heavily against falling prices on the Frankfurt futures exchange, Eurex, have already liquidated these positions. The put/call ratio has fallen to 1.8. In the previous week, this value was still 2.8.

In the USA, the put/call ratio of the Chicago futures exchange CBOE shows that investors there are increasingly willing to hedge. The investment ratio of US fund investors has fallen to 44 percent and is now also at its lowest level since the corona crash. In other words: US fund managers are sitting on a lot of cash that can be invested.

The bull/bear ratio of US private investors has fallen to minus 30 percent, the bears dominate the trading floor with a share of 54 percent. It is the highest proportion of bears in the past twelve months. It is noteworthy that at the same time the bull camp has increased from 19 percent to 23 percent. So the polarization has increased. This usually indicates upcoming large price movements.

The US markets “fear and greed indicator” calculated using technical market data has fallen to 25 percent, showing extreme fear. Other technical indicators are also down, such as the so-called “Short Range Oscillator,” which fell to minus seven, signaling an oversold state of the market. Technically, a countermove, i.e. a small recovery, is to be expected in the S&P 500 if the current news situation allows it.

There are two assumptions behind surveys such as the Dax sentiment with more than 6500 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.

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