Market sentiment: "Rigidity of mood"

6 November 2024. FRANKFURT (Goldberg & Goldberg). By the end of today's sentiment survey, it was as good as certain that Donald Trump would win the US election and become the 47th president of the USA. The US dollar had already strengthened significantly in the early morning of today's trading day and the US futures markets, but also - surprisingly for some - the stock markets in Germany, reacted with significantly firmer prices. However, as the DAX initially lost ground since our last sentiment survey, losing 2.1% of its value at times and first having to make up for this loss, the price gain of 0.6% for the week looks rather meagre.
Meanwhile, sentiment among the institutional investors we surveyed with a medium-term trading horizon has deteriorated somewhat compared to the previous week. Our Börse Frankfurt Sentiment Index fell by 6 points to a new level of -3. The bear camp increased by 4 percentage points, to the detriment of the bulls and the previously neutral investors in equal measure. It is noticeable that the pessimists from the previous week did not use the DAX's interim price loss of 2.1% to buy back shares. Possibly also because the interim book profit was not large enough.

Definitely an opinion

The change in sentiment among private investors is even smaller, with the Börse Frankfurt Sentiment Index falling by one point to a new level of +15. At the same time, the polarization between bulls and bears has increased slightly compared to the previous week - the bull camp gained 2 percentage points, the bear group 3 percentage points - which is relatively high considering that the group of neutral private investors, at 11% of respondents, is as low as it was last in April 2020.

It is also noticeable that among the two subgroups of private investors - those we survey via social media and the other participants - the clear sentiment gap that has been observed for months has almost disappeared. In other words, the otherwise much more bullish investors that we survey via social media are much more skeptical in today's survey than the other private investors, to whom we can even attest a significant increase in optimism. 

Positions without imbalance

With today's survey, however, the sentiment gap between private and institutional investors has widened again somewhat. It is noticeable that the optimism of private investors, which is pronounced at first glance, practically disappears completely when viewed in relative terms over the next three and six months. The same applies to institutional investors, who must also be regarded as neutral from this perspective. Both panels stand out due to the relatively low number of neutral players, meaning that there is a clear polarization between bulls and bears. The latter have apparently largely refrained from buying back into last week's DAX weakness, possibly also due to fear of the uncertain outcome of the US elections and the associated consequences.

In the end, most optimists as well as pessimists have hardly any gains or major losses on the clock - good conditions for a continued DAX sideways movement, which cannot be so easily unbalanced by domestic investors. Long-term capital flows, primarily attributable to foreign investors, are therefore still responsible for a new trend direction.

By Joachim Goldberg

6 November, 2024, © Goldberg & Goldberg für boerse-frankfurt.de

The Börse Frankfurt 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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