Market sentiment: “Nobody had the intention ...”

23. April 2025 FRANKFURT (Goldberg & Goldberg). It is unlikely that anyone expected the sentiment week shortened by Easter to actually bring calm to the equity markets. After all, the information technology trouble spot in the USA was of course still boiling and bubbling. This time, US President Donald Trump took on Federal Reserve Chairman Jerome Powell, which caused considerable unrest on the financial markets. To put it kindly, Trump was annoyed with the Fed Chairman, who in his view was not lowering US key interest rates quickly enough, among other things. One tirade followed the next and in many places it seemed only a matter of time before Powell would have to take his hat off. 

But as is so often the case, everything suddenly changed again yesterday. Trump suddenly said that he had never intended to fire Powell. As a result, the DAX was up around 4% on the previous week at the time of writing.

Great fear of missing out

And the institutional investors we surveyed with a medium-term trading horizon have also reacted. Our Börse Frankfurt Sentiment Index rose significantly by 36 points to a new level of +25. At the same time, the bull camp grew by 21 percentage points, whereby it is striking that around 70% of former bears have turned their position 180° to bullish. This is despite the fact that there have only been slightly more favorable entry opportunities on the bull side since our last survey compared to the closing price. Around 30 percent of the new optimists come from the group of previously neutral investors.

Private investors reacted much more calmly, although they were already much more positive than their institutional counterparts in the previous week. The Börse Frankfurt Sentiment Index in this panel even fell by 3 points to a new level of +17, with social media respondents in particular taking profits on previously bullish investments, while the other investors saw very little change. In the end, the bear camp increased by three percentage points at the expense of previously neutral investors.

Today's survey shows a significant narrowing of the sentiment gap between private and institutional investors. However, compared to the previous week, the signs are reversed. While private investors were significantly more optimistic than institutional investors at the time, the latter are now ahead on the bull side.  And Donald Trump's latest statement was received almost euphorically by them! 

Strong contrast

This may have something to do with the fact that, within the predominantly negative stream of news, a reasonably positive piece of news has finally provided a fairly clear contrast. After many investors had feared for both the independence of the US Federal Reserve and the status of the dollar as the world's reserve currency, there has now been something of an all-clear. It remains to be seen whether investor confidence is justified in the longer term and whether this has initiated a sustainable turnaround for the better on the stock markets. At least the commitment of institutional investors is high.

At the same time, this reveals a problem: the new bullish commitments must (as has already been the case this year) yield quick profits and must not be disappointed by new negative news. In a favorable scenario, we probably see the first major profit-taking offer for the DAX in the 22,200/300 points range. The downside, however, is much less well supported compared to the previous week, as some of the potential domestic demand has already been used up in the event of another setback. Overall, the DAX is therefore weighed down by sentiment. 

by Joachim Goldberg

23 April, 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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