A market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf The ground has been laid for a recovery in the stock markets. This can be derived from the current data from the Handelsblatt survey Dax sentiment and other indicators.
Extremely negative reports, such as an escalation in the Ukraine war, could result in a sell-off, but according to sentiment expert Stephan Heibel, this should “only be short-lived”. After evaluating the Handelsblatt survey, he is certain: “Positive developments or the mere absence of further negative reports could ensure rising prices.”
Although the mood among investors is bad, according to the sentiment analysis, this is a contraindicator because many have already sold their shares by then. Investor sentiment is currently at minus 3.6, just short of the mark that indicates extreme depression.
The reason for the bad sentiment is that many retail investors’ favorite stocks sold off over the past week. Technology stocks slipped four percent, healthcare stocks gave up 3.6 percent. The sell-off was led by former corona winners such as Delivery Hero with minus twelve percent and Cancom from the IT sector with minus eleven percent.
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A week ago, the sentiment expert Heibel warned of exactly this development: “Growth stocks have further downside potential,” said the managing director of the analysis company AnimusX.
During the same period, the raw materials sector grew significantly by 2.9 percent and the logistics sector with a value increase of 1.7 percent. The development of the mining and fertilizer group K+S with plus eight percent and the airport operator Fraport with a profit of seven percent was striking.
Fraport was a Corona loser paper that is still trading at a favorable valuation level: The price-earnings ratio for 2023 is 13 with expected sales growth of 15 percent and disproportionate profit growth of 30 percent. K+S has grown by 75 percent since the outbreak of war. The use of the fertilizer Kali, which K+S sells, is an early reaction to the expected crop failures in the Ukraine and Russia.
“But hardly any private investors have invested in Fraport or K+S, such stocks were considered boring until recently,” explains Heibel. Instead, the former high flyers Zalando, Hellofresh and Delivery Hero were bought. Their fall in prices is now weighing on the mood of investors.
In addition, investors are extremely unsettled. It seems that there is no more hope. Hardly any investor is willing to buy. At the same time, there are hardly any sellers, as the low trading volume shows: In the past trading week, an average of around 53 million papers were traded every day. In the past three months, this value was over 100 million pieces per day.
This indicates that the market has bottomed out. “According to the sentiment analysis, negative developments are largely taken into account in the current price level,” explains Heibel. Developments such as an imminent major offensive by Russia in eastern Ukraine and the lockdown in China are no longer a surprise. Most investors have now adjusted their portfolios to some degree to reflect these trends.
Current survey data
In addition to the poor overall mood already mentioned, the individual indicators also show the continued high level of uncertainty. For example, complacency, which measures how satisfied investors are with their decisions, has fallen to minus 2.5 for the third straight week. For almost every second survey participant, the expectation was not or only barely fulfilled in the past week.
Future optimism, the benchmark for investors’ expectations, has also been in the red for three weeks now. Before the Ukraine war, there was only one week in the past eleven months when this sentiment indicator was also negative. That was at the end of November, shortly before Omicron led to further corona measures and heralded the temporary end of the bull market.
Corresponding to this pessimism, the willingness to invest is also low with a value of 0.6.
The Euwax sentiment of the Stuttgart stock exchange, where private investors trade, has recovered slightly and is now only minus five percent after minus 7.5 percent. Negative values indicate an excess of put versus call products on the Dax in the portfolios of private investors and vice versa. This decline means that private investors only use put products to protect themselves against falling prices to a limited extent.
The put/call ratio of the Frankfurt futures exchange Eurex, which reflects the hedging tendency of institutional investors, also shows a moderate, but no longer extreme, hedging tendency at a value of 1.6. The same applies to the put/call ratio of the Chicago futures exchange CBOE, where the value of 0.92 corresponds to the average hedging propensity over the past five years.
Investment quota in the USA increases again
US fund investors have increased their investment ratio to 83 percent. Since the outbreak of war at the end of February, when this rate fell to a historically low 30 percent, it has risen steadily and is now back in the normal range. At minus 16 percent, the bull/bear ratio for US private investors indicates a moderate overhang of the bears, who expect falling prices.
It becomes historical when the survey is examined in detail. Only 15.8 percent of the private investors surveyed are bullish, i.e. believe in rising prices. This is the lowest bull value since 1994, when many good stock market years followed. The reason for this was the theory at the time that economic growth could also take place without intermittent recessions. Share prices rose significantly up until the turn of the millennium, when the so-called Internet bubble burst and caused a bear market that lasted several years.
The US markets’ fear and greed indicator, based on technical data, remains in neutral territory at 43 percent. Other short-term technical indicators are not showing any extreme values either, despite the falling prices in the past week.
There are two assumptions behind surveys such as the Dax sentiment with almost 7000 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 informed automatically 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.
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