Market sentiment: “Amazement, skepticism and just a little bit of joy”

12. February 2025. FRANKFURT (Goldberg & Goldberg). Despite the new US tariffs on steel and aluminum and Trump's tariff threats for the eurozone, the DAX has marked a new all-time high practically every trading day since our last sentiment survey - albeit sometimes only marginally - and reached the 22,000 mark for the first time. At the end of the reporting period, the DAX was up 3.3% with only one minor setback in the meantime, and since the beginning of the year we are now talking about a DAX rise of almost 13%. Much to the chagrin of the recently bearish majority among the investors we surveyed. This is because the record-breaking run on the German stock market has so far been accompanied by great amazement rather than euphoric comments and exuberant celebrations. In many places, skepticism was even the order of the day

In fact, sentiment among the institutional investors with a medium-term trading horizon surveyed by us has deteriorated for the fourth time in a row: our Börse Frankfurt Sentiment Index has fallen by a further 6 points to a new level of -19. At the same time, the bears now represent the absolute majority - more than the 50% of respondents surveyed today were last measured on April 10 of last year. Incidentally, the bear camp, which has grown by 4 percentage points, is made up equally of former bulls who have taken their profits and previously neutral investors. 

Politically and fundamentally motivated
The motives for the new pessimistic engagements are probably not only due to the comparatively favorable selling level, but are certainly, like the older bearish engagements before, also politically and fundamentally motivated.

There was a trend in the opposite direction among private investors. The Börse Frankfurt Sentiment Index rose by 13 points to a new level of +8 in this panel, with a large gap opening up between the private investors surveyed via social media and the other private investors. While the former - in an extremely disciplined manner and presumably with major losses - have largely turned previously bearish investments 180° to the bull side, the same cannot be said of the other private investors. Among them, the number of pessimists has increased slightly to a similar extent as among institutional investors, presumably also because the exposure in this group is likely to be significantly greater than that of the private investors surveyed via social media.  

Running hot? 
The bottom line is, of course, that a wider sentiment gap has again emerged between private and institutional investors. The majority of the latter in particular have now been holding against the upward trend of the DAX for weeks, but not only for perfectly understandable political and macroeconomic reasons. Rather, many of these exposures are now likely to be well under water, which means that there is a strong aversion to realizing the accumulated book losses anyway. It is clear that people then like to argue instead that the DAX has run hot and is overbought. However, this could change if the DAX were to actually produce a setback towards 21,600/650 points. This is where we expect initial demand from the latest bearish investors - the average entry price of the remaining pessimists is likely to be significantly lower.

Overall, it is more likely that, on the other hand, long-term capital flows, primarily from abroad, continued to drive the stock market barometer upwards during the reporting period.And should this inflow continue, a large part of the bearish majority would certainly have to pull the emergency brake on the way up and could possibly trigger a veritable short squeeze.All in all, the DAX remains in a favorable situation, especially as the bulls, who are in the minority, would not have much to oppose a further rise apart from some disruptive profit-taking. 
 

From Joachim Goldberg

12. Februrary 2025, © Goldberg & Goldberg für boerse-frankfurt.de

Der Börse Frankfurt Sentiment-Index bewegt sich zwischen -100 (totaler Pessimismus) und +100 (totaler Optimismus), der Übergang von positive in negative Werte markiert die neutrale Linie. 

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