Market sentiment: “Drama and no end in sight”

9 July 2025. FRANKFURT (Goldberg & Goldberg). Over the past few days, outsiders could well get the impression that events on the financial markets were taking place on two stages. On the one hand, there was something quite dramatic on offer - it was the “tariff threat”, a play in several acts with the author and leading actor Donald Trump. However, anyone who may have been eagerly awaiting the resolution of the drama yesterday after the 90-day break since Liberation Day will now have to wait again, until August 1. And then, according to Trump, the curtain will really come down and there will be clarity about the threatened tariffs. After all, the President has already announced that he will impose tariffs of 50 percent on copper and 200 percent on pharmaceuticals.

On the other “stage”, where the price action on the stock markets is taking place, there seems to have been little notice of the almost boring customs drama, at least in this country. Since our last survey, the DAX has been able to continue its upward trend slowly but steadily after an initial small setback, resulting in a week-on-week gain of 2.5%. It seems as if many stock market players have already become accustomed to the possible negative effects of trade tariffs because the whole story has dragged on for so long, or have reacted with relief because there was no “tariff letter” for the eurozone.

Persevering in the bear's enclosure
However, only a small proportion of the institutional investors we surveyed with a medium-term trading horizon appear to have been involved in the recent rise in the DAX. This is because our Börse Frankfurt Sentiment Index rose by just 4 points compared to the previous week to a new level of +4. The increase of five percentage points for the bulls and one percentage point for the bears was driven by previously neutral investors. In other words, the recent pessimists from the previous week have barely reacted to the DAX rise and are now sitting on book losses.

In contrast, some of the pessimistic private investors have at least reacted to the DAX rise in a fairly disciplined manner. The Börse Frankfurt Sentiment Index rose by 5 points to a new level of +11 in this panel because the bear camp has shrunk by 5 percentage points and these pessimists have joined the neutral investors.

Disciplined private investors
This development is primarily driven by those we do not survey via social media. Interestingly, the group of optimists among the latter has shrunk on balance - on balance, the group of neutral private investors has increased by 5 percentage points.

With today's vote, the sentiment gap between institutional and private investors has changed only slightly. However, it is noticeable that, in contrast to private investors, the proportion of neutral institutional investors has fallen by 6 percentage points compared to the previous week, meaning that both panels are almost at the same level in this respect.

Now, the optimism among institutional investors is mainly attributable to previously neutral players, while the pessimists from the previous week have remained largely inactive. This group would probably be happy if the DAX were to fall back to 23,700/750 points - the level at which we expect initial demand in the event of a setback. On the other hand, however, optimism is not so high that we would have to expect significant resistance if the stock market barometer were to rise further. The bottom line is that the sentiment situation for the DAX remains favorable.
 

By Joachim Goldberg

9 July 2025, © Goldberg & Goldberg for boerse-frankfurt.de

The Börse Frankfurt Sentiment Index ranges between -100 (total pessimism) and +100 (total optimism), with the transition from positive to negative values marking the neutral line.

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