17/02/21 14:01:41

Market sentiment: "The bears have disappeared"

German investors show remarkable skepticism towards the price gains but this tends to give the environment a relaxed scenario. 

International investors are extremely bullish and here in Germany skepticism prevails. Joachim Goldberg suspects that covering short positions at 13,830 points pushed the sentiment index of professional investors to 0 points while the DAX remains unchanged near its record. Remarkably, professional bulls, bears and neutrals are very balanced with 33 and 34 percent respectively. Private investors have moved in the same direction but express slightly more optimism with +9 points.

According to Joachim Goldberg, the pessimists are not really convinced of their position but are waiting for more favorable entry opportunities, probably between 13,650 and 13,700 DAX points. The bottom line is that the starting position is good for price gains of German blue chips.

17 February 2021. FRANKFURT (Börse Frankfurt). One could well get the impression that the past few days on the stock markets were characterized by euphoria. Especially with a view to the USA. On the one hand because global equity funds benefited from an unprecedented inflow of capital from investors last week. And secondly, the Bank of America (BofA) survey for the month of February which was published yesterday, showed that international fund managers were even more euphoric than a month ago. This is because, according to the survey, optimism and risk appetite reached new record highs between February 5 and 11. This also applies to the assessment of the development of the global economy in the coming twelve months, which, with a net 91 percent of respondents (this corresponds to the balance between positive and negative answers!), marked the highest level in the survey to date. But the fund managers' cash ratio is also at its lowest level since February 2013, at just 3.8 percent. And because the proportion of survey participants overweight in equities has also risen from a net 53 percent to 61 percent, one may well ask whether there are any equity pessimists left at all. Meanwhile, it is noticeable that the domestic DAX has not budged since the last sentiment survey, let alone managed to mark a new all-time high like the US indices.

... but not in this country

That the equity bears in Germany have not yet disappeared, however, is shown by today's sentiment survey among medium-term oriented institutional investors. Their sentiment has improved somewhat compared to the previous week, as our Börse Frankfurt Sentiment Index has risen from -5 to a level of absolutely neutral +/-0. At the same time we were able to detect a rare occurrence in today's survey which has so far only happened once since we started our surveys in 2002: all groups in the panel are practically equally divided, each with around one third of the respondents. To find a similarly balanced distribution, you still have to go back to 2014.

The latest shift among institutional investors is largely due to former pessimists covering their positions, who may have used the interim DAX setback since our last survey (13,830) to buy back shares, albeit only to a manageable extent.

Sentiment among private investors also improved to a rather minor extent compared with the previous week. This panel's Börse Frankfurt Sentiment Index rose by 4 points to a level of +9. Cover buying by former pessimists is likely to account for most of the shift.

Waiting for more favorable buying opportunities

So while international investors must have been extremely euphoric, skeptics are definitely still to be found in this country. However, we do not believe that the remaining bears are fundamentally pessimistic players. The previous week's survey rather shows that many of these investors are likely to still be covering their engagements which are due to sales of the previous week on a large scale. This is because the only notable setback of the DAX in the reporting period with a short-lived minus of 1.4 percent has so far not been attractive enough to tempt larger buy orders. Orders that will probably only take effect between 13,650 and 13,700 DAX points.

Incidentally, the bottom line is that the proportion of those international fund managers who are overweight in eurozone equities according to BofA has fallen from a net 29 percent to 20 percent compared with mid January, without this having hurt the DAX on balance. All factors taken together the environment for German equities remains favorable from a sentiment perspective but there can be no talk of euphoria in this country.

17 February 2021, © Goldberg & Goldberg for boerse-frankfurt.de

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Sentiment index of institutional investors

 BullishBearishNeutral
total33%33%34%
compared to last survey-1%-5%

+6%

DAX (change from previous survey): 14.020 (+0 Pts.)
Börse Frankfurt Sentiment Index institutional investors: +0 points (status of previous survey: -4 points)

Sentiment index of private investors

 BullishBearishNeutral
total42%33%25%
compared to last survey

+1%

-3%+2%

DAX (change from previous survey): 14.020 (+0 Pts.)
Börse Frankfurt Sentiment Index private investors: +9 points (status of previous survey: +5 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.

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