A market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf In the stock market, even in the worst situations, you get used to it. This is also the case when looking at the Ukraine war: With the rising prices, the uncertainty on the market is decreasing, as the Handelsblatt survey Dax sentiment among around 6000 private investors shows.
“The depression of the previous week is making room for hope,” says sentiment expert Stephan Heibel, who evaluates the survey for the Handelsblatt. “Those who have not panicked in the past few weeks feel vindicated.”
In the past week, the leading German index Dax rose by almost 800 points or 5.8 percent. This further improved investor sentiment: while investor sentiment was minus 7.9 two weeks ago, it has now reached minus 1.4 after minus 4.9 in the previous week.
The situation is similar in the USA: Here the technical fear and greed indicator of the market-wide stock index S&P 500 has risen to 35 percent and has thus left the area of extreme fear of the previous week of 15 percent.
Top jobs of the day
Find the best jobs now and
be notified by email.
This value suggests that the Ukraine war is now fully priced into the courses and further price gains are possible. “The sentiment indicators are still a long way from overheating,” says Heibel. “Although we saw a decent recovery movement in the past week, the panic of the previous weeks has not yet dissipated. There is still room for improvement.”
However, the managing director of the analysis house AnimusX points out that the mood is no longer as extreme as it was a week ago. At that time, after panicked sales, a few buyers were enough to move prices up again, but now the danger that bad news will be negatively received by investors is increasing again. “More and more positive reports are needed for the recovery movement to continue,” says Heibel.
This can also be seen in the recent course of the Dax: On March 9, the hope for a diplomatic solution in the Ukraine war caused the biggest daily gain in almost two years. In the days that followed, news of this kind also led to strong price gains. Recently, however, this effect failed to materialize.
For example, the Turkish foreign minister said in an interview over the weekend that Ukraine and Russia were close to reaching an agreement on “critical issues” and that he hoped for a ceasefire. Nevertheless, the Dax continues its sideways movement of the past few days: since last Wednesday it has been in a range of 14,110 and 14,553 points.
“We find ourselves in a market environment that is heavily driven by news, in which the next message can always turn the market around,” says Heibel. “So it’s still a good idea to have some cash on hand while some stocks that have come back strongly can already be put into the portfolio.”
The continued great caution on the market is also reflected in the future expectations of investors. This has fallen to 1.4 from 2.8 in the previous week. The majority is therefore only assuming an interim recovery. “So some investors used this week’s rally to thin out their positions,” says Heibel.
Although the number of optimists has fallen, the willingness to invest remains high at 3.6. While in the previous week 34 percent of those surveyed said they would like to buy shares in the next two weeks, the figure is now 32 percent. “That suggests speculators who can make money in both directions from the market turbulence,” says Heibel.
However, the cash ratio is not as high as it was a week or two weeks ago. This means that investors have less money available to buy new shares and thus move prices up.
Most investors shy away from risk
Overall, however, the willingness to speculate is low, as shown by the Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade. Here the sentiment remains at the zero line, so there is no overhang of call or put leverage products on the Dax in the depots. Heibel deduces from this: “Private investors are obviously not the ones who currently want to take special risks.”
The situation is similar for institutional investors. The put/call ratio on the Frankfurt futures exchange Eurex is also in neutral territory at 1.6. So professionals are also holding back. The same picture in the USA: Here, too, the put/call ratio on the CBOE futures exchange is at a neutral level.
The professionals also currently hold a lot of cash here. The US fund managers have increased their investment ratio slightly to 47 percent, but this is well below peak values from rally phases.
US private investors also remain cautious. 50 percent of them are pessimistic (bearish), only 22.5 percent are optimistic (bullish). The bull-bear ratio of US private investors shows a strong overhang of the bears at minus 27 percent.
Other asset classes
- Gold: Investor sentiment on the gold market remains good. Most recently, the price for a troy ounce had scratched the $2,000 mark. At the same time, however, expectations for the future are on the ground. “This is not a good starting point for further price increases,” says Heibel. After all, who should then ensure rising prices? Heibel therefore considers a consolidation possible, for example a setback to 1900 dollars. “In the best-case scenario, the course will move sideways for the time being. A positive surprise event would be needed for the price to rise further.”
- Oil: The situation is similar on the oil market: the mood is good, while at the same time optimism about the future is on the rocks. However, the situation here is not as pronounced as on the gold market, says Heibel: “We know from the past that a party, i.e. rising prices, can last longer than you think it is possible. I would therefore not speculate on falling prices.” But it is now probably too late to bet on rising oil prices. The price for a barrel of North Sea Brent has risen by almost 40 percent since the beginning of the year.
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.
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 seven mistakes in volatile times.