Market sentiment: “No appetite for risk”

15 January 2025. FRANKFURT (Goldberg & Goldberg). It is said that there are stock market experts who believe that the month of January has a particularly bullish effect on the stock markets. Even if you don't think much of such so-called calendar effects, it can at least be confirmed that the first month of this year has started with a negative sign in many places, albeit on a manageable scale. However, it is also fair to say that January is only half over, so the bullish forces that have been invoked may well still come into play. At least in terms of average inflows into equity funds and equity ETFs (based on assets under management in each case), according to a study by an investment bank, January was historically the best month of the year between 1996 and 2022.

Since our last sentiment survey, the DAX has not really pleased the bulls either. This is because an initial slight price increase was followed by a significant decline, which at times pushed the stock market barometer down by 2.2% close to the 20,000 mark. Nevertheless, at the time of the survey, the DAX had recovered and was only 0.3% below last Wednesday's closing level.

No room for new optimism

At least some of the medium-term oriented institutional investors we surveyed seem to have used the DAX setback to take profits. For one thing, our Börse Frankfurt Sentiment Index has risen by 5 points compared to the previous week to a new level of +2. And on the other hand, this rise is entirely attributable to former bears who have closed out their investments (to a similar extent as their pessimistic colleagues in the previous week): The group shrinks once again by 5 percentage points in favor of the neutral-minded market participants. What remains astonishing in this context is the fact that, on balance, no one dared to take the bullish side.

Among private investors, there was a slight change in the opposite direction, with the Börse Frankfurt Sentiment Index of this panel falling for the fifth time in a row, this time by 3 points, to a new level of +2; this is the lowest level in four months. Overall, there was a movement of 3% of all respondents from optimists to pessimists. As has often been the case in the past, the private investors surveyed via social media were more bullish overall than the other investors in this panel, who now have a slightly negative attitude on balance. 

With great caution

With today's survey, our Börse Frankfurt Sentiment Index is on a par in both panels with a level of +2. While there is a clear polarization between bulls and bears among private investors, this does not apply to their institutional counterparts, where sentiment is balanced between bears, bulls and neutral investors. This is remarkable insofar as the macroeconomic environment and media coverage also convey little positive for the DAX with regard to unfavorable influencing factors from the USA (impending tariffs, higher bond yields). Perhaps this also explains why investors have not ventured to the bull side since the beginning of the year.

After all, the balanced sentiment among institutional investors ensures that there do not appear to be any massive imbalances at the moment and therefore no major trends are expected in the short term due to the clear risk aversion of some players. In many places, investors seem to be betting on a sideways movement. And so it is left to long-term capital flows to trigger the next impulse in the DAX.

from Joachim Goldberg

15 January 2025, © 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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• Explanation of the method