20/07/22 13:40:00

Market sentiment: "Better than feared"

Despite opposing positioning by private and institutional investors during the past two weeks, there have been winners on both sides due to the large trading range in the DAX since last Wednesday.

The weak phase of the DAX from last week to near the June low and the subsequent more than 7 percent recovery of the stock market barometer have brought price gains to a part of both private and institutional investors. As a result, the large gap in sentiment between these two panels has shrunk again significantly. Despite this development and the impressive recovery on the stock markets on both sides of the Atlantic, Joachim Goldberg continues to believe that this is merely a correction in the overriding bear market.

20 July 2022. FRANKFURT (Börse Frankfurt). It is said that some people have such negative expectations of future events that they can only be positively surprised. The same could be said of the stock market players on yesterday's trading day, who ensured that the DAX ultimately gained around 4.3 percent since our last survey. It remains to be seen whether the trigger for this rally was the burgeoning hope that gas deliveries via Nord Stream 1 could be resumed in a reduced form in the near future. Or that the US company Netflix came up with the positive surprise after the close of the stock market there that it had lost significantly fewer subscribers during the second quarter than analysts had predicted. The reference point of their expectations just has to be set low enough for players to perceive even a bad number as "good."

Speaking of negative expectations: Bank of America's (BofA) latest fund manager survey, published yesterday, found that a net 44 percent of asset managers surveyed say they are underweight in equities. This is still the largest underweight since October 2008, just weeks after the Lehman collapse. At the same time, cash holdings rose to 6.1 percent in July, so that - among other key figures - one need not be surprised when the survey (from July 8 to 15!) speaks of a capitulation on the part of fund managers.

Capitulation? We don't!

Meanwhile, it doesn't look like the medium-term institutional investors we surveyed have thrown in the towel. It is true that optimism, as measured by our Börse Frankfurt Sentiment Index, has fallen by 5 points compared to the previous week to a new level of +3. But there is much to suggest that the bulls, who have now turned their backs on the DAX (6 percent of all respondents) and moved almost entirely to the sidelines, have taken their profits from the engagements they opened two weeks ago.

Among private investors, however, there was once again an opposite development, as the Börse Frankfurt Sentiment Index of this panel rose by 10 points to a new level of +1. On the whole, it can be said that previously bearish players probably in the wake of the DAX weakness from last week directly to the bull side. Together with previously neutral players, this results in an increase of 6 percentage points among optimists.

Rapprochement from both sides

With today's survey, the sentiment gap that had opened up between private and institutional investors during the past two weeks has almost disappeared. On the one hand, because a favorable buying opportunity has arisen for some of the private investors with the DAX's downturn to near the June lows. And because institutional investors were able to unwind a small part of their bullish exposures, probably also at a profit, in the ensuing rally of around 7.8 percent at times.

The bottom line is that the sentiment situation for the DAX has improved somewhat compared to the previous week. However, the recent upswing of the stock market barometer still represents no more than a correction in a bear market. This is because the majority of the remaining optimistic institutional investors are still waiting for much higher DAX levels in order to be able to extricate themselves from imbalances. In order to generate a sustainable uptrend, however, international investors would have to return to the euro zone with their investments. After all, a net 35 percent of fund managers in the aforementioned BofA survey said they were underweight in eurozone equities of all things.

20 July 2022, © Goldberg & Goldberg für boerse-frankfurt.de

Sentiment index institutional investors


Compared to last survey



DAX (Change to last survey): 13.300 (+550 points)
Börse Frankfurt Sentiment institutional investors: +3 points (Status last survey: +8 points) 

Sentiment index private investors


Compared to last survey



DAX (Change to last survey): 13.300 (+550 points)
Börse Frankfurt Sentiment index private investors: +1 points (Status last survey: -9 points)

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