Market sentiment: “Smoke without fire”

22 October, 2025. FRANKFURT (Goldberg & Goldberg). It took only a week for the stock markets to be affected again. We are talking about two US regional banks that made headlines last Friday and triggered fears of an impending banking crisis in many places. True to the motto: where there's smoke, there's fire. But the concerns were apparently unfounded and the fears seem to have vanished into thin air. The DAX was affected by all of this last week, with a relatively significant temporary decline of 2.5 percent. At the beginning of the week, the world in Germany quickly returned to normal, as if nothing had happened, allowing the DAX to recover. However, since our sentiment survey last Wednesday, there has been a slight decline of 0.2 percent.

Despite the interim recoveries, the institutional investors with a medium-term trading horizon whom we surveyed did not want to dismiss two noticeable setbacks within two weeks as insignificant. At the very least, our Frankfurt Stock Exchange Sentiment Index has fallen significantly for the second time in a row – this time by 17 points to a new level of +2. This was probably due to a large-scale unwinding of bullish positions, with the 11 percentage point decline in optimism distributed roughly equally between the bearish and neutral investors. After all, slightly more than half of those willing to change were able to turn their commitments around 180° from bullish to bearish – an indication that, at least in this group, no major losses were likely to have been incurred.

Fear is not everywhere

The situation is different for private investors, however. In this panel, our Frankfurt Stock Exchange Sentiment Index actually rose by 2 points to a new level of +21. The group of neutral investors has grown significantly, increasing by 10 percentage points. At the same time, the polarization between bulls and bears has decreased significantly, albeit asymmetrically. This is because the group of pessimists has decreased by 6 percentage points, while the group of optimists has only decreased by 4 percentage points. On closer inspection, it was primarily those investors whom we survey via social media who were responsible for this shift. Among the remaining private investors, there was a small migration from bears to bulls, in contrast to institutional investors.

Today's survey reveals a clear divide in sentiment between private and institutional investors. While the former are even slightly more optimistic than last week, institutional investors clearly do not trust the current peace. The Frankfurt Stock Exchange Sentiment Index has fallen by 28 points in two weeks in this panel, starting from a comparatively high level of optimism. Not only did the bull camp lose 12 percentage points, but the bears gained 16 percentage points in the same period.

Supportive long-term demand

However, the DAX fell by only 0.7 percent on balance during these two weeks, which is actually too little for such a shift in sentiment or positioning. There is therefore good reason to believe that long-term capital may have been behind these share sales. This capital may also have come from abroad, especially since the Bank of America survey of international fund managers published last week showed at least a slight increase in interest in eurozone stocks. It is quite possible that the associated capital inflows provided some support for the DAX and may still be doing so.

So even if the recent flare-up of pessimism among local institutional investors is based on longer-term fears, the latest investments will naturally want to be closed out profitably. Ideally, this will be at significantly lower prices than today, probably in the range between 23,520 and 23,570 DAX points. At the same time, the upside is relatively open given the latest results. Not a bad starting position for the DAX.

by Joachim Goldberg

22 October, 2025, © Goldberg & Goldberg for boerse-frankfurt.de