Investors have increasingly hedged against losses.
(Photo: dpa)
Dusseldorf An interesting mood prevails on the German stock market: the professionals are pessimistic, but private investors are slowly becoming optimistic for the coming months. While the short-term mood is still depressed, i.e. panic selling is occurring, there is already constructive optimism for the Dax in three months and a corresponding willingness to buy. For the sentiment expert Stephan Heibel, these are “good conditions for the formation of a bottom” for the German stock market.
The basis for his forecast is the Handelsblatt survey Dax-Sentiment and the evaluation of other indicators.
Up until today, Monday, the range between 15,000 points on the underside and 15,600 points on the underside of the leading index has held for several weeks. However, the increasing tensions in the Ukraine conflict have caused the stock market barometer to slip below the 14,800 point mark today.
The shortcoming: only a few private investors had prepared themselves with appropriate hedging positions for the possible invasion of the Russian army in the Ukraine, although this has been feared for a long time. “So there should be a heavy sell-off,” predicted Heibel before the start of trading.
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In his opinion, the crisis does not have to escalate with a bang, compromises and partial solutions are definitely possible. “We don’t even know the main interests of those involved,” says the sentiment expert.
He is sticking to his forecast from the previous week because the five-week average of sentiment, an indicator that has been accurate for years, is still at a very negative level: in the worst case, a further slide might be severe, but only short-lived.
“It would tend to be enough if no more new negative reports hit the market in the coming weeks to ensure rising prices,” says the owner of the analysis company Animusx.
The contrast to sentiment in the USA is also interesting. On the other side of the Atlantic, bears are dominant among both private investors and professionals. The explanation: In the USA, many growth stocks had climbed to high valuation levels during the Corona period and have now slipped extremely.
In the Dax, on the other hand, there are many fundamentally solid companies with high dividends that are now being sought after the pandemic and the time of high inflation. “If we disregard the conflict in Ukraine, it is quite understandable that the Dax bottomed out earlier than its US counterparts,” says Heibel.
The mood on the gold market has jumped sharply, and optimism has also surged at the same time. Such an impulse can ensure rising prices on the gold market for a few weeks.
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Investor sentiment remains subdued. The current value is minus 3.9. However, the extreme values from the end of January, when the mood was meanwhile at minus 5.3, have not yet been reached. Uncertainty is also very high at minus 3.6, but was even greater at minus 4.8 at the end of January.
It is surprising that future expectations have jumped significantly to a value of plus 1.9. In the previous week, this value was still plus 0.5. Heibel’s conclusion: “It appears that the survey participants believe that the bottom has been crossed and that they want to position themselves for rising prices”. This is also reflected in the willingness to invest, which at plus 2.4 jumped to the highest value of the still young year.
The Euwax Sentiment of the Stuttgart Stock Exchange, where private investors trade, is quoted at a value of two, close to the zero line. The number of call and put leverage products on the Dax is at a similar level in their portfolios.
Private investors therefore neither protect themselves against further price losses nor do they speculate on rising prices. Who would want to position themselves where new developments in the conflict over Ukraine can be observed every day.
Professionals who hedge via the Frankfurt futures exchange Eurex have a put/call ratio of 2.8. This shows that the professionals are currently increasingly hedging themselves against price losses. The same behavior can also be observed on the Chicago futures exchange CBOE in the USA. The put/call ratio there has also continued to rise.
US fund investors have reduced their investment quota to 53 percent. They are now as low invested as they were last in spring 2021, when the success of the vaccination campaign was discussed because of the delta mutation.
The bull/bear ratio of US private investors has slipped to minus 24 percent, with the bears clearly dominating the mood with a share of 43 percent. The “fear and greed indicator” of the US markets, which is calculated using technical market data, is trading in neutral territory at 38 percent.
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.