Dusseldorf. The German stock market has decoupled from the US stock exchanges. After a long period of weakness, the German leading index Dax rose by 2.1 percent last week. The market-wide US index S&P 500, on the other hand, lost 1.9 percent in value.
But investors don't have to panic buying. The Handelsblatt Dax sentiment survey shows that the coming weeks could be turbulent again.
To assess DAX sentiment, Handelsblatt surveys more than 10,000 private investors every Friday morning to Saturday evening about their current market assessment. Stephan Heibel, managing director of the analysis company AnimusX, evaluates the answers and supplements them with further indicators.
Heibel has adapted its evaluation methodology. Until now, values below minus four points or above four points were considered extreme. Now he uses a more complex methodology, which he also used in a separate survey by AnimusX. The extreme values are variable and are on a different scale.
On the new evaluation scale, investor sentiment improved from minus 36.6 points in the previous week to minus 15 points. This means that the mood has clearly moved away from the extreme range, which starts at minus 46 points.
Complacency also improves, but to a lesser extent. It only increases from 1.41 to 1.48 points. 80 percent of the historical values are in the range of 1.42 to 1.91 points. This means that complacency is still close to the lower extreme values.
Self-satisfaction is measured by survey participants indicating whether their expectations were fulfilled in the past week. The less expectations are fulfilled, the lower the level of complacency.
Many investors missed the price recovery
Heibel interprets the fact that the values are only improving slightly despite the significant price increase as follows: "Obviously not all investors have participated in the recovery in the DAX; many will probably be invested in the technology stocks that were under pressure last week."
Meanwhile, expectations for the future are falling for the second week in a row. It falls from plus 18.9 points to 13.6 points. The survey participants indicate which market phase they expect in three months.
Heibel sees a possible explanation for falling optimism in a frequently observed development: when prices rise, future expectations often fall in the survey because part of the expected price gains have already occurred with the rising prices.
The willingness to buy, on the other hand, has increased again, from 54.7 to 56.9 points. At values above 50, there are more buyers than sellers. This indicator only reaches extreme values at values above 63.
Heibel sees a positive development in the combination of rising mood, falling expectations for the future and greater willingness to buy: “This is the picture of a recovery.”
In the past, downward movements often ended when current sentiment was poor and future expectations were low. In this case, it is a sign that most investors who hold their positions without long-term conviction have already sold. This reduces the selling pressure to such an extent that prices can rise sustainably again.
However, Heibel currently sees the problem not on the seller side, but on the buyer side. A separate survey by AnimusX shows that investors currently only have a few free liquid assets. “So who else should buy?” asks Heibel.
He therefore assesses the current situation in two ways: "The obstacle that I have described in recent weeks, the defiant optimism, is dissolving. This is countered by a positioning that leaves hardly any fresh money left."
The sentiment expert therefore sees no reason for investors to invest their free money immediately and completely. Rather, he expects that things could become uncomfortable on the stock market again. Because the existing burden of increased interest rates, high energy prices and doubts about the boom in artificial intelligence remains.
Heibel therefore says: “The midterm elections in the USA will cause further turbulence in which investors can gradually use the cash cushion built up over the summer to collect excessively penalized favorite stocks.”
Monday's development seems to confirm the AnimusX experts: the Dax is falling by more than one percent.
