Market sentiment: "Quite different opinion"

1 March 2023. FRANKFURT (Börse Frankfurt). The trading range in which the DAX has moved since our last sentiment survey was practically marked on a single trading day. That was last Friday, when the stock market barometer retreated almost 2.5 percent to end the month near its lowest closing price in February. Yes, it looked like the pessimists among the stockbrokers were going to be proven right with this relatively violent closing move. Particularly since commentators and analysts also had little positive to say about the development of interest rates on this side and on the other side of the Atlantic. 

In the U.S. in particular, economists' inflation and interest rate expectations have recently moved upward, a fact that was reflected in the yields of U.S. government bonds and also here in Germany. Alone, stock prices in this country - now a mystery to more than a few players - have so far refused to react appropriately to these fears. On a weekly basis, the DAX actually rose by 0.8 percent on the reporting date.

And so it comes as no surprise that the sentiment of the institutional investors with a medium-term trading horizon surveyed by us has not changed much compared to the previous week: Our Börse Frankfurt Sentiment Index has nevertheless risen by 2 points to a new level of -20, as an almost negligible number of former pessimists have retreated to the sidelines.

Private investors do not want to miss anything

Hectic activity, on the other hand, can be read from the mood of private investors. Driven by an obviously pronounced FOMO (=Fear of missing out) and as if there would soon be no more stocks to buy cheaply, the Börse Frankfurt Sentiment Index made a significant leap upwards in this panel and shot up 24 points to a new level of +16 and thus to a new high for the year. It seems that not only former bears were suddenly in a hurry to close their positions and directly sided with the optimists, whose group gained 15 percentage points. Incidentally, this increase is fed on balance in a ratio of 60 to 40 by former pessimists and neutral investors.

Today's survey has created a clear gap in sentiment between institutional and private investors; it is the largest difference so far this year. Above all, the new optimism of private investors is truly remarkable in view of the cautionary voices of many bank strategists, the majority of whom take a rather critical view of share price developments. Also because all previous sentiment surveys this year for this panel could only identify a small percentage of investors willing to change their position. The large masses have actually hardly moved over long stretches up to the present day.

Pessimists in bondage

The fact that institutional investors, on the other hand, have only moved a little may be due above all to the fact that since the second week of this year, the majority of them have tended to adopt a bearish basic position. For only a few of the pessimistically oriented engagements are likely to show larger book profits so far. Thus, the sentiment-technical situation for the DAX remains not bad, especially since the remaining pessimists are still likely to intervene in the market action as buyers of their engagements only in the case of more significant price declines (probably just below 15,000 DAX points). However, on the other hand, the number of pessimists is not so high that they could contribute to a stronger short squeeze in the event of further price increases. On balance, however, the robustness of the DAX also depends on the continuation of international capital inflows, which do not seem to have diminished so far.

1 March 2023, © Goldberg & Goldberg for 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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