Dusseldorf The higher the Dax rises, the greater the expectation that the leading German index will soon slip again. This is shown by the data from the current Handelsblatt survey Dax-Sentiment.
With a value of minus 2.6, the expectation of the Dax development in three months is at its lowest value since summer 2020. At that time, a few months after the Corona crash, investors did not want to admit that the pandemic was scary loses and the Dax rises again.
Otherwise there are only a few comparative values for the currently high level of pessimism about the future. Sentiment expert Stephan Heibel has searched the database of his AnimusX analyses, which has a longer history than the Dax sentiment survey, which has only been around since September 2014.
There was already a similarly high value in May 2006, shortly before the start of the major real estate crisis. “The sentiment data obviously predicted the catastrophe at the time,” explains Heibel. There were similar values in June 2009, three months after the real estate crash bottomed out, and in January 2010.
This shows that in the aftermath of a major financial crisis, pessimism persisted for a long time, and the recovery on the financial markets was also observed in disbelief. Finally, there was an extreme in June 2022, when investors began to realize that Russia’s war against Ukraine was likely to last longer.
Heibel compares today’s extreme pessimism with the values from 2009 and 2010, when the recovery after the crash already brought significant price gains and the many negative events that were initially the cause of the crash had not yet been resolved. “For example, Deutsche Bank stumbled from one scandal to the next for years after the great financial crisis.” In Heibel’s experience, a trough in the stock market does not form if the problems are solved. “A low is formed when investors can assess the scope of the problems.”
The stock markets are already rising while the catastrophe is just taking hold. If at some point a solution is finally in sight, the stock market is usually already close to its high. “All in all, we have a very constructive mood development,” says Heibel. Setbacks should remain manageable, at least in the short term. However, it remains unclear how close the Dax is to the high and which future crises could put an end to the rally.
There are two assumptions behind surveys such as the Dax sentiment with more than 8,000 participants: if many investors are optimistic, they have already invested. Then only a few are left who can 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.
With the Ukraine war, the discussion about Taiwan independence and the banking problems in the USA, there are enough problems and imminent dangers to explain the extreme pessimism. But as long as the situation doesn’t escalate, the stock markets should continue to rise, says the AnimusX owner.
Also supporting the current rally is the fact that last week’s rising prices, including new highs for the year, were used by investors to take profits. The investment ratio, which was previously at an extremely high level, fell significantly last week without prices slipping.
Investor sentiment rose slightly to 3.5 points from 2.7 points in the previous week. Only from a value of four does euphoria prevail, which is more of a burden for further rising prices. The current mood is only moderately positive.
Self-satisfaction is also similar with a value of plus 2.4 points. However, a look at history shows that since November 2021, the survey participants have not been as complacent as they were at the end of last week. In the weak stock market year 2021, complacency turned into uncertainty and remained continuously in negative territory for a year.
Even the rally that started at the end of September was only able to dispel the uncertainty very slowly. Only now is there moderate complacency.
Due to the currently high level of pessimism about the future, hardly any investor wants to buy anymore. The willingness to invest is at 0.0 points, after minus 0.1 in the previous week. Both values are the lowest since the outbreak of the Ukraine war.
Private investors are currently hedging themselves somewhat more against price risks. This is shown by the Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade. This indicator has fallen to minus three. Investors therefore buy a little more leveraged put products, which increase in value when prices fall.
The put/call ratio of the Frankfurt futures exchange Eurex, which institutional investors use to protect themselves against falling prices with put options, shows a similar picture. The value of plus 2.3 shows relatively strong demand. And the put/call ratio of the Chicago futures exchange also shows a slightly increased tendency to hedge.
US fund managers have reduced their investment ratio by 14 percentage points to 59 percent. Here, too, the defensive orientation is visible.
The bull/bear spread of US retail investors shows a dwindling optimist. A week ago, every third person was optimistic, now it’s only 26 percent. The former cops have switched to the neutral camp. The bear camp remains unchanged at 35 percent. So the pessimism has not increased, but the optimists have probably pocketed profits and are waiting to re-enter.
The “fear and greed indicator” of the US markets, calculated using technical market data, is at 67 percent and shows slight greed. The technical indicator “Short Range Oscillator” of the US stock exchange barometer S&P 500, which fluctuates much more quickly, fell slightly to plus four percent despite the continuous rise in share prices. The market is still considered overbought, meaning it has risen too high too quickly. However, the declining volatility has caused a slight normalization of this indicator with prices continuing to rise moderately.
Positive mood on the gold market
The mood on the gold market is now consistently positive. Only nine times in the past 17 years has this value been sustainably more positive. In six of the nine cases, there were higher rates six months later. On average, the gold price increased by 6.3 percent.
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