A market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf Investor sentiment reaches a bad dimension unprecedented in this survey. According to the Handelsblatt survey Dax-Sentiment, there has been a continuously negative mood since the second week of January this year. Since the survey began in 2014, sentiment has never been negative for 17 weeks in a row.
A similar situation prevails among US private investors. Two weeks ago there were fewer optimists than at any time since the survey began in 1987. Now the current survey shows one of the most pessimistic readings in the past 34 years. “It’s hard to imagine new events that can continue to drive such extremely negative values.” explains sentiment expert Stephan Heibel.
According to sentiment theory, unless significant events dictate a different direction, stock markets must soon rise. The principle applies: if investors are pessimistic, the majority of them have not invested. Then only a few can sell and thus depress the courses.
However, Heibel, who evaluates the weekly Handelsblatt poll, warns: “Nobody knows what steps Russia will take next. And no one knows how much longer China can hold out with the zero-Covid strategy.”
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These are probably the most important influencing factors for future developments on the stock markets. Many investors see it that way too. The willingness to invest, for example, has risen to a moderate 1.6 points. Apparently, investors are waiting for a signal that a solution to the Ukraine war and China’s draconian corona policy can be read to buy shares.
Bears dominate the oil market
Investor sentiment on the oil market is interesting: According to data from the analysis company AnimusX, bears are dominating there after the price has passed the $100 per barrel (159 liter) mark. Most investors are obviously expecting the oil market to relax and oil prices to fall as a result.
“I would be careful there,” says Heibel, going against investors’ expectations. US President Joe Biden is currently dissolving one million liters of strategic US oil reserves every day, which is then sold on the market. The current oil price remains above this mark despite the additional supply.
But some questions remain unanswered for the sentiment expert: What if oil reserves fall to an extremely low level towards autumn? What influence does the strict Covid policy in China have on the demand side? To what extent will current fears of recession still have an impact in the future?
The sentiment for the oil market warns against accepting falling oil prices as a given. “There are definitely possible developments that could ensure a continuation of the oil price rally,” says the sentiment expert.
Current survey data
Investor sentiment remains subdued at minus 2.8. The same applies to complacency: negative poll numbers underline that investors are unsettled. With a value of minus 3.2, there is uncertainty for the 17th time in a row.
After such a long phase of disappointments, setbacks and negative experiences, hardly any investors dare to form an opinion about future developments. This is indicated by future expectations of minus 0.2.
The distribution is more revealing: 20 percent of those surveyed expect prices to rise, 21 percent expect prices to fall. But 42 percent believe in sideways movement, i.e. more investors than bulls and bears added together. At the same time, the willingness to invest has increased to 1.6. The investment rate is therefore moderate.
Investors dissolve hedges
The Euwax sentiment has also increased, to minus 3.5 most recently. Negative values indicate an excess of put versus call products on the Dax in the portfolios of private investors and vice versa.
At the beginning of the year, private investors protected themselves against price losses by purchasing put products. They were sold at the beginning of the war and bought again in the run-up to Russia’s next offensive in south-eastern Ukraine. Now these put purchases will be liquidated again.
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The situation is very similar for institutional investors who hedge themselves via the Frankfurt derivatives exchange Eurex: the hedging transactions of the previous week are sufficient for the time being – the purchase of put options has declined.
In the USA, on the other hand, hedging transactions rose sharply in the past week. The Chicago futures exchange’s put/call ratio has jumped significantly, meaning new protection has been bought. US fund managers also sold again. The investment rate has fallen by almost three quarters to 46 percent within a week, indicating a defensive positioning of professionals.
The bull/bear ratio for US private investors has fallen to minus 43 percent, a historically low value. 59 percent of investors are bearish, i.e. expect falling prices. Only 16 percent are bullish, meaning they expect prices to rise. Pessimism has rarely been so pronounced in recent years.
The fear and greed indicator for the US markets, which is calculated using technical market data, shows only moderate fear at 34 percent. Other short-term technical indicators point to an oversold market situation. “Oversold” means that so much has been sold that a countermovement on the stock markets should already take place if there is no more bad news.
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