Markets

Market sentiment: “Dramatic news – calm investors”

Price fluctuations get few investors moving, the mood remains neutral within a narrow range.

October 7, 2020. FRANKFURT (Frankfurt Stock Exchange). It was the headlines about US President Donald Trump that have dominated the news situation in this country since our last sentiment survey. Of course, the stock markets gave way last Friday in response to the dramatic news that Donald Trump had contracted Covid-19. But far less, as some commentators had initially feared. And so the DAX, for example, found its bottom comparatively early in the range between 12,500 and 12,550 points we were targeting for initial demand. And after the weekend everything seemed to be forgotten anyway when Trump returned from his hospital stay.

In fact, the financial markets took little notice of it and probably concentrated on the negotiations on the stimulus package in the US between Republicans and Democrats. Negotiations that Donald Trump put on hold last night until after election day on November 3, completely surprisingly. However, without consequences for the DAX, which despite renewed alarmism by many commentators, has only reached a trading range of around 3.3 percent since last Wednesday.

Reset used to get started

In the mood of the medium-term oriented institutional investors we surveyed weekly, not much has changed, however, despite all this possibly disturbing and everything else in the background. Because our Börse Frankfurt Sentiment Index has just risen by 6 points to a level of +11 points. Incidentally, this is the highest level since March 18th. One can assume that a few investors – it is only 4 percent of all respondents – may have used the comparatively low entry level from the previous week to close out previously bearish commitments.

Profitable private investors

The opposite development was almost inevitable among private investors, who, in contrast to their institutional counterparts, were extremely optimistic in the previous week. The Frankfurt Stock Exchange Sentiment Index of this panel fell by 12 points to a level of only +5. There was not only profit-taking by around a tenth of all previous optimists. Most of them even turned their positions 180 degrees in order to play along on the bear side from now on. The news situation seems to have favored this behavior – in addition to the motive of wanting to secure profits.

With today’s survey, institutional investors and private investors, coming from different directions, have come closer to each other again. In absolute terms, the optimism of the institutional investors is not noticeable at +11. However, the relative optimism in this panel has increased significantly over the next six months and is now at its highest level since November 2018. This does not result in a euphoric environment, but an improvement in the optimistic mood. In addition, the 1.2 percent increase in the DAX is likely to have been largely homemade.

On balance, however, not much has changed in the mood of the DAX. In the event of further setbacks, the stock market barometer may help further demand in the range between 12,550 and 12,600 points from fundamentally positive investors. However, the upside seems capped between 13,200 and 13,250 points, so that stronger DAX advances would be slowed down there. Overall, it can be stated that the situation of the DAX has improved slightly compared to the previous week.

October 7, 2020, © Goldberg & Goldberg for boerse-frankfurt.de

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