The willingness to invest has increased significantly.
(Photo: dpa)
Dusseldorf An interesting situation prevails on the German stock market: since the end of September, the Dax has already risen by more than 30 percent, and the probability of further brilliant price jumps without a fundamental reason, so-called “short squeezes”, is high. This can be deduced, among other things, from the results of the Dax sentiment survey, which the analysis company AnimusX compiles for the Handelsblatt.
After evaluating the survey, AnimusX Managing Director Stephan Heibel is certain: “Should the Dax rise a little bit, investors could be forced to cover their hedging positions at a loss.” Because both private investors and professional investors have in the past few days bought many put products in the rising prices, which gain in value when prices fall.
Put derivatives work practically like short sales. Put simply, this means that if an investor buys a put product on the Dax, the Dax is sold. And when the derivative is sold, the Dax must be bought back again. So strong hedges create a kind of safety net that cushions a price drop to a certain extent.
As a rule, such a short squeeze takes place in a very late phase of a rally, before the much earlier expected consolidation at a significantly higher level. That’s why sentiment expert Heibel sticks to his statement, which he now repeats in the third week: “The potential for surprises is on the upside.”
The chance of further rising prices is therefore greater than the risk of falling prices. Since the first forecast two weeks ago, the Dax has already climbed more than 400 points.
The picture is different in the USA, where further price gains are expected. The different moods are easy to explain. “While an end to interest rate hikes is being discussed in the USA, an increased rate of interest rate hikes is to be expected in Europe for an indefinite period,” explains Heibel.
In addition, most US companies have already published their quarterly figures in the past few days, while in Germany the majority will only open their books one to two weeks later.
The quarterly figures from the USA have so far not been as bad as feared. Apparently, last year’s sell-off was overdone for many stocks. Nevertheless, the recovery trend since last October is likely to end soon. “In my opinion, the current quarterly figures will now separate the wheat from the chaff for the individual stocks,” explains Heibel. The sentiment survey can’t help much here because it only refers to indices.
However, the great skepticism in Germany based on the put products purchased shows that expectations of the quarterly figures are relatively low. “So there is plenty of scope for positive surprises,” says Heibel. “Negative numbers, on the other hand, should hardly affect the stock markets in Germany, since investors have already prepared for them.”
Current survey data
Investor sentiment has risen to 4.3 points, signaling great joy or even euphoria with regard to the latest stock market development. No wonder: the Dax had taken a small rally break at the end of January, but continued the upward movement with a weekly plus of two percent.
However, the survey participants are not really satisfied with their investment decisions. Complacency has risen to 2.4 points and is therefore only moderate. Since the end of September, the Dax has climbed 30 percent, so much more complacency would have been expected.
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But it seems that few investors can benefit from the rally. Most were obviously caught on the wrong foot.
This also explains the great skepticism that can be read from future expectations. With a value of minus 0.9, the bears are in the majority. Apparently, most investors expect the rally to peter out soon.
The skepticism is not uncharacteristic of a recovery rally. Prices like to climb up a so-called “wall of fears”, especially after difficult times on the stock exchange. The rally only ends when skepticism fades and most investors switch to the bull camp. Due to the negative expectations for the future, the willingness to invest remains very low with a value of plus 0.9 points.
The Euwax sentiment of private investors slipped again to minus 18. In the previous week, this value was at its lowest level since the corona crash. The clearly negative value indicates an extremely high proportion of put products in private investors’ custody accounts. This group of investors hedges massively against price setbacks and is even likely to speculate on falling prices.
A similar picture can be seen on the Frankfurt futures exchange Eurex, which institutional investors use to protect themselves. With a put-call ratio of 2.0, twice as much put protection is bought as call options. Institutional investors are obviously also speculating on an end to the rally and are anticipating a sharp setback.
A completely different picture emerges in the USA: The put-call ratio of the Chicago futures exchange CBOE has fallen sharply. US investors are increasingly buying call options, speculating that the rally will continue.
US fund investors have also increased their investment ratio by three percentage points to 78 percent. US fund managers haven’t been this heavily invested since war broke out last February. The US retail investor bull-bear spread has narrowed to minus 4.6.
35 percent of the investors surveyed are pessimistic, 30 percent expect prices to rise. The “fear and greed indicator” of the US markets, which was determined using technical market data, shows extreme greed with a value of 80 percent and urges caution.
Interesting constellation on the oil market
There is currently a special situation on the oil market. The future expectations for the development of the oil price are extremely optimistic among the participants in the sentiment survey. According to Heibel, unlike the stock market, there is a positive correlation between expectations and the future oil price trend for oil.
“In the past, there were already 30 similarly positive expectations,” explains Heibel. “On average, the oil price has jumped by 18.4 percent in the following three months.”
There are two assumptions behind surveys such as the Dax sentiment with more than 7,800 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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