Market sentiment: “When fear replaces skepticism”

18 June, 2025. FRANKFURT (Goldberg & Goldberg). Since our last sentiment survey, very few people would have expected the discussions about trade tariffs to be overshadowed by a completely different issue: the Israeli-Iranian war, which has been dominating the headlines since June 13. According to the latest survey by Bank of America (BofA), the mood among international fund managers regarding the global economy, recession, and inflation had normalized to a level last seen before the so-called US Liberation Day on April 2, but now much is likely to be perceived differently. This is also because the survey was completed one day before the war began.

It is therefore not surprising that the DAX suffered a loss of 2.3 percent compared to the previous week. Although the majority of institutional investors we surveyed already had reservations about the DAX's “too positive” performance up to last Wednesday and were correspondingly skeptical, sentiment has deteriorated further. Our Frankfurt Stock Exchange Sentiment Index fell by 10 points to a new level of -25. It is not even the case that the bear camp has risen particularly strongly again – we measure an increase of 2 percentage points – but this time it was the optimists who got cold feet. The bull camp has fallen by 8 percentage points. In other words, three-quarters of the bulls who were willing to change sides have merely become neutral investors – possibly not entirely voluntarily.

No profit-taking

On the other hand, it was mainly the pessimists who had just switched to the bear camp the previous week (15 percent of all respondents) who were guided by profit-taking, at best temporarily. What was initially seen in some quarters as merely a temporary setback in the stock market barometer for quick profits now seems to have turned into genuine fear. This is particularly true as our Frankfurt Stock Exchange Sentiment Index has fallen to its lowest level since February.

There was also a massive shift in sentiment among private investors. The Frankfurt Stock Exchange Sentiment Index in this panel fell by 13 points to the neutral 0 line. Interestingly, it was primarily investors surveyed via social media who did a complete 180 and turned their bullish outlook bearish. We must not forget that, unlike other private investors, this subgroup had been extremely bullish for most of this year. The latter probably even made a few purchases during the downturn, but the bottom line is that little has changed in terms of the majority pessimism in this subgroup. 

Home-grown DAX weakness

Overall, however, it should be noted that despite geopolitical events, the volatility of the DAX has not increased dramatically. But the temporary decline of 3 percent in the stock market barometer did not lead to profit-taking by the bears; in some places, book profits may even have been higher. From a behavioral perspective, the refusal to realize profits of this magnitude can be explained primarily by new fears that are apparently greater than the urge to take the chips off the table.

Incidentally, the recent price performance of the DAX seems to be primarily home-grown. This is because international fund managers' interest in eurozone stocks has hardly diminished. At least in the latest BofA survey, a net 34 percent (previous month: 35 percent) of asset managers said they were overweight in eurozone stocks.

Today's survey offers at least a glimmer of hope, as domestic demand potential for the DAX has risen significantly over the past two weeks. This potential will come to bear – possibly quite strongly – once the initial effects of habituation to the fears have set in.

by Joachim Goldberg

18 June, 2025, © Goldberg & Goldberg for boerse-frankfurt.de

The Frankfurt Stock Exchange 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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