Despite falling prices, quite a number of medium-term investors are going long. Not a good sign, according to Joachim Goldberg.
Bad news and rising interest rates continue to drive down the prices of German blue chips, and local investors are reacting to this with a change in sentiment. 13 and 8 percent, respectively, close their short positions, the majority of which enter equities. This pushes the sentiment indices up significantly to +5 and -3 points.
Joachim Goldberg sees price signals behind the attempt to buck the downward trend. The low for the year of 12,391 could be an important reference point. The behavioural economist sees this as a burden for the market. If prices continue to fall, he believes that many are likely to quickly divest themselves of shares again.
28 September 2022. FRANKFURT (Börse Frankfurt). For participants in the financial markets, it should have become clear once again since our last sentiment survey that the US Federal Reserve cannot take a joke when it comes to inflation. At the very least, the Fed made it clear that it will continue to push up key interest rates to fight inflation. And at the same time, most players have probably come to the conclusion that nothing will change soon in the Fed's hawkish monetary policy stance - even if it means accepting the threat of recession. With consequences for the markets. Not only because other central banks have followed suit and bond yields on both sides of the Atlantic have risen massively in recent days. The stock markets have also been hit hard once again, so that the local DAX, for example, lost around 5 percent of its value in a weekly comparison almost without a major breather and even marked a new low for the year.
Negative news notwithstanding
However: All the negative news for the stock markets, including that concerning the Nord Stream pipelines, does not seem to have left any traces of panic among the medium-term oriented institutional investors we surveyed. At the very least, our Börse Frankfurt Sentiment Index has risen significantly by 21 points to a new level of +3 - it is the first positive value in two months. If we look at the shifts between the individual groups, it becomes clear that the pessimists, who have recently been in the majority, have cashed out. In the process, 13 percent of all respondents have left the bear camp and, with a majority of around 60 percent, have even ventured to the bull side.
We have noticed a similar development among private investors, whose sentiment has also improved. The increase in the Börse Frankfurt Sentiment Index in this panel is not quite as strong, but with a plus of 14 points to a new level of -5 it can certainly be described as remarkable. Here, too, the group of pessimists has shrunk considerably by 8 percentage points, with three quarters of these former bears joining the bulls directly and thus turning their positions by 180 degrees.
Dangerous courage
The bottom line is that the positive development of sentiment among both institutional and retail investors remains remarkable. In an environment that is virtually paved with negative news and commentary, there is apparently an increased will to act as a buyer into weakness. There is much to suggest that predominantly price-related motives may have been decisive for this change in sentiment - the year-to-date low of 12,391 may have provided an important reference point for the stock buying behind it. Especially since the DAX had already tested similarly low levels three times this year until its final breakout.
However, it is worrying that the DAX was ultimately unable to recover despite this buying. Indeed, the optimism of some players today in this decidedly unfavourable economic and geopolitical environment is an additional burden for the stock market barometer. At the very least, today's new bulls are unlikely to have been betting on a trend reversal, but at best on a recovery rally. In any case, the number of those who could possibly pull the emergency brake in the form of share sales in the event of further price declines has increased significantly.
28 September 2022, © Goldberg & Goldberg for boerse-frankfurt.de
[Translate to English:]
Die Börse stellt Anlegerinnen und Anlegern psychologische Fallen. Wer sie kennt, kommt besser mit schwierigen Phasen klar. Zeit für etwas Trost von dem erfahrenen Behavioural-Finance-Analysten Joachim Goldberg. Denn Crash sind im Rückblick stets verpasste Chancen, scheinen in der Gegenwart unüberwindbar.
Bullish | Bearish | Neutral | |
Total | 41% | 38% | 21% |
compared to last survey | +8% | -13% | +5% |
DAX (Change to last survey): 12.000 (-630 points)
Börse Frankfurt Sentiment index institutional investors: +3 points (Status last survey: -18 points)
Bullish | Bearish | Neutral | |
Total | 36% | 41% | 23% |
compared to last survey | +6% | -8% | +2% |
DAX (Change to last survey): 12.000 (-630 points)
Börse Frankfurt Sentiment index private inbestors: -5 points (Status last survey: -19 points)
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