Market sentiment: “Back on track”

14 May 2025 FRANKFURT (Goldberg & Goldberg). Even the most optimistic stock market analysts probably did not expect the USA and China to agree to lower the tariffs imposed on each other by 115 percentage points for 90 days in the trade dispute. Even though negotiations still have to continue and the tariffs are still higher than before January 20, when Trump ordered the first “America First” trade measures, the majority of participants on the capital markets applauded. The DAX was also able to gain around 1.5% compared to the previous sentiment survey - its fifth consecutive rise. The stock market barometer also marked two new all-time highs during this period.

According to the May survey by Bank of America, international fund managers also showed significantly less pessimism than was the case in April. At that time, 82% of those surveyed believed that the global economy would be worse off in the coming twelve months; now the figure is only 59%.

The emergency brake has been pulled

Meanwhile, sentiment among the institutional investors we surveyed with a medium-term trading horizon has also improved. Our Börse Frankfurt Sentiment Index rose by 8 points compared to the previous week and is now at the neutral 0 line. But not because great new optimism has emerged. In fact, it is noticeable that half of the young bears from the previous week have dropped out again, which is why the group of pessimists has shrunk by 6 percentage points. Only a third of them turned directly to the bull side, while the majority presumably had to pull the emergency brake and thus joined the neutral players for the time being. This is also supported by the brief DAX excursion last Monday, when the stock market barometer temporarily gained around 2.8% compared to the time of the survey last Wednesday.

On the surface, there was once again little change among private investors, whose Börse Frankfurt Sentiment Index fell by 2 points to a new level of +21. Behind this small change, however, are larger shifts if you separate those investors we surveyed via social media from the others. The latter were initially bullishly positioned, but then profitably reduced a large part of their exposure and moved directly to the bear side in the order of two thirds of these previously bullish positions. As a result, the Börse Frankfurt Sentiment Index currently stands at -2 for this sub-group alone. And because there has been a movement in the opposite direction among social media investors, these not insignificant changes are barely visible on balance.

Eurozone equities in demand again

On balance, the Börse Frankfurt Sentiment Index of investors with a higher level of commitment is therefore in neutral territory, with the groups of bulls, bears and neutral participants among institutional investors almost balanced. One could also say that investors are waiting for a clear upward or downward impulse.

This leaves the “playing field” largely to international investors. Incidentally, according to the aforementioned Bank of America survey, which was completed on May 8 (75% of survey participants cast their vote before the announcement of the US-Chinese trade talks in Geneva), these investors are once again more interested in eurozone equities. A net 35% (previous month: 22%) of asset managers stated that they were overweight there. Although this is not yet an extreme value, further gains are now somewhat less likely. This is still not bad news for the DAX, but domestic investors are finding it difficult to establish new bullish exposures at the comparatively high level. This would be easier in the event of a not-too-sharp setback, which is why we expect initial demand from these sources to come from just below 23,000 DAX points. 

by Joachim Goldberg

14. May 2025, © Goldberg & Goldberg for boerse-frankfurt.de

The Börse Frankfurt Sentiment Index moves between -100 (total pessimism) and +100 (total optimism), the transition from positive to negative values marks the neutral line. 

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