Market sentiment: "What is Powell planning?"

20 August 2025. FRANKFURT (Goldberg & Goldberg). Given the many important political events that have taken place since our last sentiment survey, one might have expected more volatility on the stock market. However, the meeting between the US and Russian presidents in Alaska and the subsequent summit between the US, Ukrainian President Volodymyr Zelensky, and European heads of state and government provided some optimism for the DAX, at least temporarily. In the end, however, the stock market barometer produced a trading range of just over 1.5 percent—the last time sentiment was this narrow was before and around Christmas last year.

Of course, one could argue that this is due to the holiday season, when trading activity is sometimes slower, but in 2024, for example, stock market activity during the summer weeks was significantly more lively than it is at present. There are indications that many traders have become so accustomed to the constant stream of news, especially from the US, that they now respond to this barrage of information with a weary shrug. This is particularly true since most of these news items are relativized shortly thereafter.

Traditional gathering in the valley

However, perhaps the focus of attention is already shifting to the important central bank symposium in Jackson Hole, a valley in the state of Wyoming in the middle of the Rocky Mountains, where leading economists, central bankers, and government representatives will gather tomorrow, as they do every year. Even though no monetary policy decisions will be made at this meeting, it would not be the first time that US Federal Reserve Chairman Jerome Powell has delivered a surprise in his speech.

At least some of the institutional investors we surveyed with a medium-term trading horizon seem to have adjusted to this. Our Frankfurt Stock Exchange Sentiment Index has fallen by 10 points to a new level of -13. Bullish positions were often closed out at a profit – 10 percent of all respondents abandoned this position, and two-thirds of those willing to change their minds did so completely, switching from bullish to bearish, while the remaining third moved to the neutral camp.

The mood among private investors has also deteriorated significantly. However, the fact that our Frankfurt Stock Exchange Sentiment Index has fallen by 19 points to a new level of -7 in this panel is primarily due to investors whom we survey via social media. Once again, this subgroup, which had been particularly bullish so far this year, has seen a significant shift in sentiment toward the negative. The remaining private investors, who were already quite pessimistic recently, made only minor changes to their positions—the sentiment index in this group stands at -22, down 5 points.

Better not to let anything burn

Today's survey shows that the gap in sentiment between private and institutional investors has narrowed significantly. Both groups are showing a certain degree of caution in view of the upcoming “Jackson Hole” event risk. In many cases, however, this has not only led to profit-taking on bullish positions, but also to hedging against falling prices. Ideally, these positions will be unwound in the event of a possible DAX decline, with initial significant demand from these sources expected at 23,850/900 DAX points. However, this demand would not be sufficient to counteract larger international capital outflows.

At the same time, demand at the upper end has improved to such an extent that the previous hurdles (primarily between 24,500 and 24,600 DAX points) should be easier to overcome than before. Overall, the starting position for the DAX has improved somewhat compared to the previous week.
 

by Joachim Goldberg

20 August 2025, © Goldberg & Goldberg for boerse-frankfurt.de

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

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• Explanations of the method