Dusseldorf From depression to exuberance: the mood among private investors has undergone a major reversal. This is shown by the current data from the Handelsblatt survey Dax sentiment.
A comparable development occurs on average only twice a year. Investors who got in before this change showed good timing, says sentiment expert Stephan Heibel, who evaluates the survey. Because after such a change in mood, the Dax rose twice as much as usual in the next six to twelve months. According to Heibel, it is only possible to derive no forecast from this turnaround for the next one to two months.
Overall, the sentiment values for the Dax sentiment are relatively neutral and thus allow the current rally to continue. Within ten trading days, the leading German index has risen by around 1200 points. However, no new drivers for a continuation of the rally can be derived from the sentiment analysis.
However, further rising prices would catch one group of investors on the wrong foot: the professional investors. You have bought many put options over the past few days to protect yourself against price losses. A look at the Frankfurt derivatives exchange Eurex shows this.
Accordingly, further rising prices would accelerate the rally if the pros have to liquidate their put positions. Because these options work practically like short selling. Put simply, this means that if an investor buys a put product on the Dax, the leading index is sold first. And when the derivative is sold, the Dax must be bought back again.
The positioning of private investors, on the other hand, argues against further price increases. According to data from the analysis company Animusx, their investment rate is currently comparatively high. As a result, this group has little capital to re-enter.
Overall, the situation on the stock market has calmed down a little after the turbulence in the global banking sector. This can be seen from the Dax plus of 4.7 percent in the past week.
Expert Heibel suspects that this is related to the interest rate outlook. “If the banking crisis is already over, then the short episode will have helped the central banks in their plan to tighten liquidity,” explains the economist. The central banks could then be much closer to their target rate than feared three weeks ago.
Rising interest rates tend to weigh on the stock markets. In this respect, this risk would have decreased as a result of the banking crisis – so it could be that the markets have recently caught up on price gains in large steps that might have been achieved in small steps over a longer period of time without the banking crisis.
Current survey data
The sharp change in mood in numbers: Investor sentiment jumped to plus 3.8 points after minus 1.9 points in the previous week. Parallel to the great improvement in sentiment, the uncertainty among investors has disappeared. Complacency has risen from minus 5.1 points in the previous week to now plus 1.4 points.
However, there is little hope that prices will continue to rise: the future expectation of the Dax development in three months has slipped to minus 1.4 points and shows the pessimism that still dominates the market. The willingness to invest has also fallen slightly to plus 1.4 points.
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, is hovering around the zero line and shows that investors are currently deciding neither in one direction nor in the other. The number of call and put notes in the securities accounts is balanced.
The put-call ratio of US investors is also in neutral territory on the Chicago futures exchange CBOE. The investment ratio of US fund managers has risen by twelve percentage points, and asset managers are again counting on rising prices.
The bull-bear difference for US private investors is minus 28 percent. The bears, with a share of 45 percent, face only 22 percent bulls.
The fear and greed indicator of the US markets, calculated using technical market data, shows a neutral condition with a value of 45 percent.
There are two assumptions behind surveys such as the Dax sentiment with almost 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.
High expectations on the bond market
Expectations of rising prices are very high on the bond market, which in turn means falling yields. The turnaround in interest rates that began in 2022 led to a sell-off on the bond market, which catapulted the yield on ten-year government bonds from minus 0.5 percent to plus 2.8 percent.
In return, the price of the Bund future has collapsed from 179 to 131 points – a drop of 27 percent in one and a half years. The Bund future is a standardized futures contract that enables bonds to be traded and is inversely related to interest rate developments. This futures contract relates to a fictitious ten-year federal bond with a coupon of six percent.
“If the ECB actually throttles its intention to raise interest rates a little, then the Bund future can recover,” says Heibel. This possibility leads to the great optimism that is currently being measured in the bond market, according to data from the analysis house Animusx.
Oil price may continue to rise
The oil market was one of the best performers last week with a plus of six percent. On Monday, a further five percent increase in value was added due to the surprising production cuts by Saudi Arabia and other member countries of the oil association OPEC plus.
The expectations for the future price development remain extremely optimistic – it could therefore go further up. At least that has happened in the past when optimism was comparatively high.
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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