Market sentiment: "Fun on the rollercoaster ride"

13 November 2024. FRANKFURT (Goldberg & Goldberg). Stock market players in Germany have had a lot to deal with since our last sentiment survey. Be it the US election, which ended with Donald Trump's impressive victory, or the end of the traffic light coalition in Germany, which was announced on the same Wednesday. While the US stock markets staged an impressive “Trump rally”, the players here in Germany had to be content with a rollercoaster ride for the DAX within a sideways movement. In the end, the stock market barometer produced a trading range of 2.8% during the reporting period, although the result was also a loss of 2.2%.

While investors in this country have to prepare for new elections and the uncertainties that could emanate from the new Trump administration, sentiment towards equities in the US has improved dramatically following Donald Trump's victory. This is shown, for example, by the latest Bank of America survey of international fund managers (survey conducted from November 1 to 7, a good fifth of whom were interviewed after the election), in which a net 29% of respondents stated that they were overweight in US equities. This was the highest figure since August 2013, compared with just 13% before the election. At the same time, the overweight in global equities fell from 34% to 24%.

Several turnarounds

Meanwhile, sentiment in Germany has also improved compared to the previous week. Among the institutional investors we surveyed with a medium-term trading horizon, our Börse Frankfurt Sentiment Index rose by 17 points to a new level of +14. The bull camp has grown by 9 percentage points, and almost 90 percent of the new optimists are former bears who have turned their position 180° (possibly for the umpteenth time). Not least in order to once again successfully participate in the above-mentioned rollercoaster ride.

Optimism among private investors has also increased again compared to the previous week, so that we can report an increase in the Börse Frankfurt Sentiment Index in this panel by 9 points to a new level of +24. The underlying decline in the bear camp by 6 percentage points is equally in favor of the optimists and the neutral players. We also see a clearer gap again between the private investors surveyed via social media and the other players in this panel: the former are significantly more bullish than the latter.

Foreign supply versus domestic demand?

With today's survey, the sentiment gap between private and institutional investors has widened somewhat. While the former are lagging somewhat behind this year's high in sentiment, institutional investors are showing the highest level of optimism for almost a year. Based on the sideways movement of the DAX over the past week, one almost suspects that many investors are not betting on a sustained DAX rally, but rather want to profit from a continued sideways movement (cf. the aforementioned rollercoaster ride). Presumably, many of these investors would like to turn their exposure back to the short side just above 19,500 points.

However, despite the recent buying, the stock market barometer has not strengthened again - an indication that supply from long-term oriented sources - preferably from abroad as part of a shift away from the eurozone towards the USA - was and possibly still is in contrast to domestic demand. This is also supported by the recent fall in the euro against the US dollar. In other words, the recent optimism of domestic investors may ultimately prove to be a burden for the DAX. Especially if the recent buyers come under more pressure. 

By Joachim Goldberg

13 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. 

• Previous analyses
• Explanation of the method