Private investors rely on falling prices – that could be a wrong decision


DusseldorfIt was the most important decision last week: Brexit will be deferred until the end of October, but investors are clearly reacting to this new, several-month period of uncertainty: not at all.

Both optimism and investor pessimism about future stock market developments has remained the same compared to the previous week. The figures are taken from the weekly Handelsblatt survey Dax-Sentiment, a survey of more than 3300 investors.

"That amazes me," says stock market expert Stephan Heibel. Either the confidence in the negotiating ability of the EU to prevent a hard Brexit, is infinitely large. Or for investors, it does not matter now if there will be a hard or regulated Brexit. "If you ask me: My confidence in the EU policy is low," says the owner of the analysis house Animusx.

There are two assumptions behind the Handelsblatt survey on stock market sentiment: If many investors are optimistic, they have already invested. Then there are only a few left who can still buy and thus increase prices. Conversely, if investors are pessimistic, they have not invested in the majority. Then only a few can sell and thus push the prices.

Investors may be more interested in corporate news than politics

The fact that investors are not reacting to the new development in Brexit at all suggests another conclusion: Investors are less interested in politics and increasingly in corporate news. "This is also supported by the performance on the stock markets in the past week: Defensive sectors have made significant gains, while cyclical stocks have made strong gains," says Heibel. "Confidence in the economy has returned in the past week."

It is interesting to look back: In the market phase at the end of last year, up to four further rate hikes by the US Federal Reserve were conceivable. The trade dispute between China and the US threatened to escalate and a worldwide recession was possible. Companies published their forecasts for the first quarter of 2019 at this stage.


The actual figures for the first quarter, which the companies are now progressively submitting, are likely to be better than predicted. But: in itself that would be nothing new for the stock market. Because this is exactly where this development was "priced in" by the fierce rally at the beginning of the year, as it is said in the stock market jargon. This means that the players had expected the better numbers and had already taken into account in their purchases and sales. If a development is already fully priced in, the market will not respond to it when it actually occurs.

"As always, it will probably be more important to classify the annual forecasts of companies expected in the coming weeks," says Heibel. "I expect a clear relaxation, so kinder forecasts than a few weeks ago."

And for such a situation, especially private investors are wrongly positioned. Because they have hedged against falling prices or speculate on falling prices. However, if the Dax rises towards 12,500 points, they have to run after the courses and would reinforce this trend.

The latest survey results signal at least no falling prices. Only a week ago sentiment values ​​were reached, which already reminded of slight euphoria. This is considered a contraindicator. Accordingly, there was a consolidation this week, but without falling below the important mark of 11,800 points. Only 31 percent (minus 16 percentage points compared to the previous week) see in the current development in the Dax an upward momentum, another 17 percent (minus one percentage point) are based on a top education.

Will you trade in the next two weeks?

numbers in percent

At 44 percent (up 17 percentage points), the stock of neutral investors who see the Dax move sideways has taken most investors who were in celebrity a week ago. Conclusion: The sentiment of the investors is again positive, but not more euphoric than a week ago.

Only eight percent (minus 13 percentage points compared to the previous week) have speculated on the consolidation. On the other hand, only three percent of investors (minus eight percentage points) were caught cold by the consolidation.

Most have expected consolidation "for the most part" (plus 18 percentage points to 65 percent). An additional 24 percent (plus three percentage points) hardly meets their expectations. The complacency has not changed the bottom line. However, the polarization of the previous week has decreased significantly.

Which cycle phase do you expect in three months ??

numbers in percent

Investors' expectations about future developments in the DAX have hardly changed this week. 19 percent (minus 1 percentage point) expect the Dax to boost in three months and 30 percent still fear a downward impulse. 39 percent (plus one percentage point) assume that there will be no big swings – neither up nor down, so a sideways movement in the stock market language.

Even the expectation of a top education (plus one percentage point to nine percent) or bottoming out (minus one percentage point to three percent) has barely changed in the previous week. "The big event of the past week, the Brexit postponement, does not affect in the least the future optimism or pessimism of the survey participants," says Heibel.

As with complacency, the willingness to invest has become more moderate. Only one in five (minus three percentage points) wants to buy in the next two weeks stocks. Only 18 percent (minus two percentage points) want to sell. At 62 percent (plus five percentage points), only the stock of those who have not yet decided on their next trading activity is listed.

Did your expectations for the Dax in the past week come true?

numbers in percent

The Euwax sentiment of the Stuttgart stock exchange, trade in the private investors, quoted at minus 2.8. This is at a level that indicates that more hedging transactions have been entered into. This is not a wonder. With the skipping of the 11,800 points in the Dax just under two weeks ago, a price level was reached at which a consolidation at any time could wipe out most of the book profits made since the beginning of the year. Nobody wants to risk that.

By contrast, institutional investors who hedge primarily via the Frankfurt futures exchange Eurex have a put / call ratio of 0.8. So many more calls are bought than puts. This means that professional investors are increasingly betting on rising prices.

A similar positioning is also indicated by the put / call ratio of the Chicago derivatives exchange CBOE. Fund managers have slightly reduced their investment ratio after the strong jump of the previous week (minus three percentage points to 89 percent). With such value, however, fund managers are still investing more than at any other time in the past six months.

The bull / bear ratio of US private investors is very "bullish" at 20 percent, but is similar to the sentiment of German colleagues but still far from euphoric buying mood.

The "fear and greed indicator" of the US stock markets, calculated on the basis of technical market data, is again showing greed with 74 percent. He is still just under "extreme greed". This one is reached from 75 percent. Other short-term US technical indicators indicate a slight need for consolidation.

For the experts of investment consulting firm Sentix, the stock markets remain relatively strong. But the spark does not really want to jump over to the investors. "This should still be due to the relatively weak basic trust," they say after evaluating their sentiment survey. There is hardly a shift from the bears to the bulls.

The Handelsblatt survey starts every Friday and ends on Sunday. You will read the analysis on Handelsblatt Online the day after.

It is easier for readers who sign up for a free reminder mail. You will automatically receive an e-mail requesting you to participate in the survey, and another if the expert review is available on Handelsblatt Online.

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