06/07/22 13:41:00

Market sentiment: "Shared risk perception"

While many professionals seem to see and take advantage of favourable entry opportunities, private investors are pulling the emergency brake.

Medium-term investors here are moving in different directions. While 13 percent of professionals bought shares, all of whom had previously been neutrally positioned, 9 percent of private investors went short. The DAX lost 500 points in the period under consideration. According to Joachim Goldberg, the professionals apparently took advantage of the favourable entry prices at the beginning of the quarter to buy, while the private investors pulled the ripcord with stop-loss sales. The sentiment indices are far apart at +12 and -15 respectively.

The behavioural economist sees the many optimists on the institutional side as a burden for the DAX. If prices rise, they should act as sellers again from 12,950. Further danger comes from the shareholders with older commitments, who would have to pull the emergency brake in case of further losses. 

6 July 2022. FRANKFURT (Börse Frankfurt). It is by no means only the comments in the media that reflect the increased fears of recession among players on the financial markets. Especially during the past few days, these fears have been reflected above all in the development of yields on US government bonds. And ultimately also in the local stock markets. Although there was something like a breather in the downward trend due to a US holiday, the DAX lost further ground yesterday. The manageable interim recovery disappeared into thin air: Compared to our last sentiment survey, the stock market barometer again lost considerable value - at its peak the loss was around 5.4 per cent. As of the reporting date, a weekly minus of 3.8 per cent still remained.

"Entered "cheaply

Now, the institutional investors with a medium-term trading horizon surveyed by us seem to have reacted to the renewed decline of the DAX with downright defiance. Because our Börse Frankfurt Sentiment Index has risen by 12 points compared to the previous week to a new level of +12. At the same time, the group of neutral participants has halved on balance compared to the previous week and, with 14 percent of all respondents, is now at its lowest level so far this year. A large majority of more than 90 per cent of those willing to switch obviously took advantage of the "favourable" entry prices at the beginning of the quarter to buy and moved to the bull side. The small remainder, however, moved to the bear side.

In contrast, we see exactly the opposite tendency among private investors. This panel was also on the neutral zero line last week, but the Börse Frankfurt Sentiment Index fell to a new level of currently -15. At the same time, the group of bears has increased by 9 percentage points to a share of 46 percent of the respondents, i.e. to the highest level this year. Incidentally, two-thirds of these new pessimists are recruited from former optimists, some of whom apparently reacted to the new DAX price loss with stop-loss sales.

Optimists continue to bet on recovery

Today's survey has now revealed a clear divide between institutional and private investors. While the majority of the latter do not expect the DAX to rise significantly for the time being, a number of institutional investors seem to take a different view. Today's survey has added a larger group of neutral players to the already considerable proportion of optimists (36 per cent of all respondents), some of whom have watched the DAX fall by more than 2,000 points since the beginning of June. Market participants who obviously trust the DAX to stage a decent recovery.

Naturally, the optimists, who now make up almost the absolute majority of respondents on the institutional side, represent a burden for the DAX. For the recent bulls in particular may be speculating on a - quite possible - significant recovery for the moment, but in the event of rising prices they are likely to be sellers again soon (possibly between 12,950 and 13,000 points).

The real danger for the DAX, however, comes from those who have been loyal to the DAX for several weeks and will have to pull the emergency brake in case of further losses.

6 July 2022, © Goldberg & Goldberg for boerse-frankfurt.de

Sentiment index institutional investors

 BullishBearishNeutral
Total49%37%14%

compared to last survey

+13%+1%

-14%

DAX (Change to last survey): 12.600 (-500 points).
Börse Frankfurt Sentiment index institutional investors: +12 points (Status last survey: +0 points).

Sentiment index private investors

 BullishBearishNeutral
Total31%46%23%

compared to last survey

-6%

+9%-3%

DAX (Change to last survey): 12.600 (-500 points)
Börse Frankfurt Sentiment index private investors: -15 points (Status last survey: +0 points)

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