A market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf The mood on stock markets around the world is twofold. This can be derived from the current Handelsblatt survey Dax sentiment and other indicators. Extreme pessimism prevails among private investors in the USA. The topic of inflation is much more present there than in Germany.
On the other hand, the Ukraine war is much further away for the USA than it is here. In Germany, investors are now neutral. The fear of inflation is not really present in this country. In addition, the Ukraine war is now eight weeks old, a period in which many have grappled with the horrific new reality and adjusted their portfolio.
For the sentiment expert Stephan Heibel, the focus is therefore on the extremely low number of bulls in the USA. “For the US at least, another sharp sell-off in stock markets is relatively unlikely,” he says.
Because according to sentiment theory, a pessimistic mood is interpreted as a counter-indicator: If all investors expect falling prices, then they will already have mentally prepared for it. So falling prices would not cause panic. A sell-off, if triggered by a negative event, should be over quickly.
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The mood among investors was already extremely bad a week ago, which initially acted as a counter-indicator, causing prices to rise – despite a flood of negative reports. Then followed the price collapse due to the US Federal Reserve’s announcement that it would step up its pace again in the fight against inflation. The bottom line is that the Dax has hardly changed in the past week.
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The development in the USA was different. There, the Dow Jones has lost one percent in the past week. For the sentiment expert, this is due to the behavior of the respective central banks.
In the USA, the US Federal Reserve has had to put up with the accusation that it may be too late with its interest rate hikes. In Europe, on the other hand, the first rate hikes are not expected until the end of the year.
“So while people in the USA are already close to despair, in Europe they have not even recognized the problem,” says Heibel. “I can’t explain the different stock market developments otherwise.”
Current survey data: Pessimism in Germany persists
Investor sentiment has calmed down a little from minus 3.6 in the previous week to minus 2.4. Although investors are not happy about the stock market development, the disappointment is limited.
Uncertainty also rose slightly from minus 2.5 to minus 2.8. Last week’s roller coaster ride got on our nerves.
Future expectations remain subdued at minus 0.5. For the fourth week in a row, pessimism has dominated among German investors. However, the willingness to invest has increased slightly to 1.2. This means that investors are again interested in becoming active.
But only when opportunities arise. There is not much left of an investment crisis like four weeks ago. At that time, this value was now plus five. The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, is at minus five and thus indicates an increased tendency to hedge.
Negative values indicate an excess of put versus call products on the Dax in the portfolios of private investors and vice versa. Institutional investors who hedge via the Frankfurt futures exchange Eurex reduced the put/call ratio to 1.2. This means that the pros have again entered into more long speculation than on average in the past few months.
The put/call ratio of the Chicago derivatives exchange CBOE is trading in neutral territory. US investors are obviously undecided about future developments or simply under-invested.
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US fund investors have further increased their investment quota to 74 percent and are thus again invested comparatively heavily on average. Heibel rates this behavior as “cautiously optimistic”. US private investors, on the other hand, are pessimistic: the bull/bear ratio is minus 25 percent. The number of bulls expecting prices to rise remains historically low at 19 percent.
According to sentiment analysis, these values mean that if there are so few bulls, the stock markets can hardly go down in the long term. Who else is there to sell?
The “fear and greed indicator” of the US markets, calculated using technical market data, shows a neutral condition with a value of 43 percent. Other short-term technical indicators do not show extreme values either.
Bond investors are worried
The result of the sentiment analysis for the bond market, derived from the more extensive survey by the analysis company AnimusX, is striking. The mood is extremely negative, and the more meaningful five-week moving average is also at a very low level. In addition, future expectations are pessimistic.
Bond investors are unsettled, the investment quota is obviously too high against the background of the fall in prices and the associated increase in yields. The bond market is well aware of inflation.
Extreme values like last week indicate that the sell-off on the bond markets is likely to abate, at least for the time being. The level of yields could calm down in the short term after the turbulent course of the past few weeks. Last Friday, the yield on a ten-year federal bond jumped to a value of up to 0.92 percent. The yield was still negative around six weeks ago.
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