07/04/21 13:48:51

Market sentiment: "Bucking the trend again and again"

While German stocks continue to shake off their all-time high, many investors are clinging to their pessimistic expectations. Which can't be a bad starting point for further records.

The DAX has started the short trading week with a new all-time high, but local investors are rather skeptical. At least the professional investors, of which 6 percent sold shares and went directly short. The sentiment index of this group falls to -7 points. Joachim Goldberg suspects that this is not so much a case of genuine skepticism, but rather an attempt to get back into the market at a lower level. Private investors have remained rather passive with a sentiment index of +4 points. However, the behavioral economist finds it remarkable that this group hardly wants to take profits.

Bottom line, Goldberg sees the market in a good position for further gains. On the downside, potential demand between 14,900 and 14,950 points supports and on the upside, a short squeeze threatens the stubborn bears, who are probably already under water.

7 April 2021. FRANKFURT (Börse Frankfurt). While the stock markets in this country remained closed due to the long Easter weekend, the stock market rally in the USA continued unabated. And not without reason. The US economy is recovering at breathtaking speed. Above all, the U.S. labor market report for the month of March last week surprised on the positive side, which the U.S. stock markets rewarded on Easter Monday in part with new all-time highs.

But US President Joe Biden's planned infrastructure package worth around $2.3 trillion also caused economic fantasies to really explode in some quarters. Although the package is to be financed, among other things, by raising the corporate tax rate. Yes, U.S. Treasury Secretary Janet Yellen went one step further in an impressive speech at the beginning of the week by advocating a global minimum tax rate for companies. Notwithstanding this, the DAX also benefited on a weekly basis, posting its sixth consecutive gain, this time of 1.5 percent (point comparison).

With the intention of improving performance

Now we have to note once again that the majority of the institutional investors we surveyed with a medium-term outlook seem to distrust the ongoing DAX rally. After the slight increase of the previous week, our Börse Frankfurt Sentiment Index has fallen again and even somewhat more significantly. Namely, by 12 points to a new level of -7. In the process, 6 percent of all respondents have not only been content to realize the accumulated gains, but have almost completely turned directly to the bear side. It is presumably at the core a group of players who repeatedly try to improve their performance rather in the short term during DAX setbacks. Indes: Notable setbacks have recently failed to materialize.

By contrast, sentiment among private investors remained almost unchanged from the previous week. The Börse Frankfurt Sentiment Index for this panel fell by just 2 points to a new level of +4. It is worth noting that although the bullish majority in this panel has shrunk somewhat over the past few weeks, the profit-taking is still limited in view of the fact that we have identified a higher price for the DAX for the sixth time in a row at the time of our sentiment survey. After all, it is 40 percent of all respondents who do not want to realize their gains even after the DAX has risen by more than 9 percent during this period.

Patient private investors

Apart from the fact that the sentiment gap between institutional and private players has widened again with today's survey, the former are more pessimistic than this might appear at first glance. This is because if we use the three- and six-month comparison for our Börse Frankfurt Sentiment Index, institutional investors are as pessimistic as they were last in August of last year. However, this does not necessarily imply an actual negative assessment of stock market activity in the medium term. Rather, it is likely to be an attempt to re-enter trading activity as a buyer at a lower level, possibly as early as between 14,900 and 14,950 points. From this point of view, there is a support for the DAX there.

On the other hand, it is unclear how long not only the pessimists of today will stand idly by if the DAX scales further heights. In any case, one thing is certain: Sentiment is too bad in view of the price increase in recent weeks and an indication that quite a few players have missed a large part of the rally. For the DAX, therefore, the sentiment picture remains favorable, and the risk of a short squeeze in the event of new record highs has increased with today's survey.

7 April 2021, © Goldberg & Goldberg für boerse-frankfurt.de

Sentiment index institutional investors

 BullishBearishNeutral
total31%38%31%
compared to last survey-6%+6%

+0%

DAX (change from previous survey): 15.220 (+220 Pts.)
Börse Frankfurt Sentiment Index institutional investors: -7 points (status of previous survey: +5 points)

Sentiment index private investors

 BullishBearishNeutral
total40%36%24%
compared to last survey

-1%

+1%+0%

DAX (change from previous survey): 15.220 (+220 Pts.)
Börse Frankfurt Sentiment Index private investors: +4 points (status of previous survey: +6 points)

About the Börse Frankfurt Sentiment Index

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

Your opinion counts: Market expectations from investors

All interested investors are invited to participate. It only takes 15 seconds. You will receive an email with a survey link every Tuesday. The results of the analysis will be sent to you by e-mail.

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