Market sentiment: “Not the last word yet”

18 December 2024. FRANKFURT (Goldberg & Goldberg). The fact that the DAX has only seen a trading range of around 1.4% since our last sentiment survey may be due to the upcoming event risks. In contrast to 2023, when the December meeting of the US Federal Reserve and the big expiry day were already over in the last sentiment survey of the year, these events are still ahead of us this time. In particular, the meeting of the US Federal Open Market Committee (FOMC), which ends this evening (CET), could still provide important new insights. Although a key interest rate cut of 25 basis points is considered all but certain, today's decision also means that the FOMC members' interest rate forecasts are due, which are eagerly awaited in many places.

The fact that the focus of local stock market players is currently primarily on the USA may also be due to the latest fund manager survey by Bank of America, which was published yesterday. According to the survey, international asset managers made major shifts following Donald Trump's election as US president last month. 

Major reallocations

A record net 36% (previous month: 13%) of them stated that they were overweight in US equities. At the same time, there was a net underweight of 25% in eurozone equities. However, this shift is likely to have largely taken place directly after the US election.

So while this survey paints an extremely bullish picture for the USA, local institutional investors with a medium-term trading horizon have remained cautious. This is because our Börse Frankfurt Sentiment Index has strengthened by just one point compared to the previous week to a new level of -4. The polarization between bulls and bears increased slightly asymmetrically - the bull camp gained 3 percentage points and the bear camp 2 percentage points.

Relative pessimism in Germany

At first glance, little has changed among private investors either, as the Börse Frankfurt Sentiment Index of this panel fell by 2 points and now stands at +6. However, a large gap has emerged between the private investors we survey via social media and the other investors. While the latter saw a clear shift from the bull to the bear camp (13% of all respondents) within a week, social media participants were almost as optimistic as in the previous survey.

In this year's latest survey, however, the sentiment gap between private and institutional investors has narrowed somewhat. However, the relative view over the next three and six months shows a slightly pessimistic note for both panels, and even slightly more so for private investors.

The bottom line is that a larger group of bearish players remains, especially among institutional investors, who have been waiting for lower prices (ideally well below 20,000 points) for several weeks in order to cover their exposures. It is this potential demand that should support the DAX at the end of the year.  

This is the last sentiment survey for this year. We will be back on January 8, 202 and wish the participants and readers of our sentiment surveys a Merry Christmas and a successful New Year!

Joachim Goldberg

18 December, 2024, © Goldberg & Goldberg für boerse-frankfurt.de

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

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