Market sentiment: “Episode 8 of the uncanny series”

4 June, 2025. FRANKFURT (Goldberg & Goldberg). Between this survey and the previous one, the DAX has produced a range of just 2.3 percent. You have to go back to the end of January this year to find an even narrower trading range between two sentiment surveys. And that's despite Donald Trump dominating the headlines, not only in the financial news, during the past few trading days.

But even stock market traders in this country seem to have long since become accustomed to new tariff threats. They rely on the US president first announcing economically aggressive measures, only to later relativize or completely withdraw them. This has recently led to several instances where setbacks on the stock markets triggered by Trump's threats were quickly made up for. This is a pattern that stock market traders, not only in this country, are said to have exploited and which is now described as “TACO trading.” TACO stands for “Trump Always Chickens Out,” a not particularly flattering neologism (to chicken out means to back out of something at the last moment) for the US president's behavior as described above. 

Setbacks and buybacks

Meanwhile, since our last sentiment survey, the DAX has produced a setback of around 2.3 percent, but has completely made up for it, leaving the stock market barometer unchanged from last Wednesday and thus closing a sentiment week without loss for the eighth time in a row. An almost eerie series. Some of the institutional investors with a medium-term trading horizon that we surveyed probably used the temporary setback to make buybacks. Our Frankfurt Stock Exchange Sentiment Index rose by 4 points compared to the previous week to a new level of +6. This is partly because the bear camp shrank by 6 percentage points due to presumably profitable buybacks. As there has also been a decline of 2 percentage points among the bulls, the group of neutral players has grown by 40 percent compared to the previous week.

The mood among private investors has also improved slightly, causing the Frankfurt Stock Exchange Sentiment Index for this panel to rise by 3 points to a new level of +14. The change is primarily attributable to previously bearish investors (3 percent of all respondents) who have moved to the sidelines to join the neutral players. This trend was even more pronounced among investors we surveyed via social media. 

No appetite for TACO

Ultimately, the difference in sentiment between private and institutional investors has narrowed slightly, and both panels are showing slight optimism. In relative terms, institutional investors are even slightly more positive about the next three and six months. However, it is not known whether domestic investors have followed the aforementioned TACO strategy. The temporary price losses probably led some pessimists to take profits, without political motives being the decisive factor.

This means that little has changed in terms of sentiment on the DAX – we still expect the first profit-taking by the slightly more numerous optimists to occur in the 23,400/450 DAX point range. However, this should only be a short-term obstacle to the DAX's upward trend. This is because it is still not domestic investors whose positions are driving this trend. Rather, the stock market barometer is likely to benefit primarily from demand from long-term investors, mainly from abroad. A look at the strong euro against the US dollar confirms this hypothesis. In the US in particular, the political and economic situation there, especially the threat of new debt, is increasingly viewed with suspicion, which is fueling the capital movement toward the eurozone that has been ongoing for weeks.

by Joachim Goldberg

4 June 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