Markets

Green Fisher: “Selective Market Sentiment”

The lightning-fast bear market and the dynamic recovery have whirled up the mood on the stock exchange.

Where are we?

The lightning-fast bear market and the dynamic recovery have whirled up the mood on the stock exchange. Bull markets start in pessimism, grow in skepticism, mature in optimism and die in euphoria – however, an exact location is currently particularly difficult because the market sentiment is very heterogeneous.

Bears and bulls are confused

Many market participants are not even convinced that the 2020 bear market is a closed chapter. A certain basic skepticism is definitely there, given the lack of survival from the COVID-19 pandemic and far-reaching fears of a second wave. On the other hand, there are also optimistic to euphoric tendencies in certain market segments. Whenever it is difficult to determine the location, a “timeless” valuation of the stock markets is extremely helpful.

Tips for pessimists and skeptics

Yes, there are numerous risks and the next crisis will come. Equity markets will continue to experience major corrections, process events with negative surprise potential and go through volatile phases. But this is a natural part of the movements in the stock markets, which overall develop better than alternative asset classes. In 1988 the DAX started its journey at 1,000 points, today it hovers around the 13,000 point mark. The stock exchange delivers very decent returns in the long term, but the investor seldom converts them.

Tech bubble, global economic crisis, COVID-19 – there are always seemingly good reasons and historical evidence that it is better not to be invested in the stock market. In the long term, however, the biggest mistake on the stock market is not being invested at all. So question your basic attitude if you want to pursue growth-oriented investment goals – it will be difficult without stocks.

Tips for optimists and euphoric investors

An optimistic attitude is definitely advantageous on the stock market. Equities rise more often than they fall, bull markets are stronger than bear markets. Even with a permanently positive attitude you are more often right than wrong – and never underestimate that passive investing requires a good dose of boldness. Healthy optimism goes hand in hand with various constraints. Always think globally and never neglect healthy diversification.

Invest confidently and with a clear line, but keep a certain humility from the stock markets. Always keep in mind that you could be wrong! Therefore, regularly question your own opinion, let the facts guide you and do not be afraid to provide your portfolio with an effective counter-strategy if necessary. Beware of euphoric tendencies! Those who are convinced that they are smarter than the markets themselves generally take increased risks and will be punished for this at some point.

Conclusion

Even if the market sentiment appears somewhat opaque in the stock market year 2020, it is still advanced to head for the healthy middle. An optimistic attitude towards stocks is essential if you want to pursue growth-oriented investment goals. In order to avoid the dangerous transition to euphoria, set up your portfolio in a sensible manner and always focus on your long-term goals.

You can request the current capital market outlook from Grüner Fisher Investments free of charge at www.gruener-fisher.de.

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