Market sentiment: "A little bit of a harvest"

A number of professionals are taking profits, while private investors are holding out and believing in further price rises. Overall, this improves the prospect that these will actually happen, as Joachim Goldberg analyzes.

22 November 2023. FRANKFURT (Goldberg & Goldberg).?The bull story for the stock markets on both sides of the Atlantic has continued since our last sentiment survey. The DAX did not move upwards at the same speed, but somewhat more slowly, and once again produced a weekly gain - this time 1.7% on the reporting date. In fact, for those who still wanted to jump on the bull bandwagon, there have been no significant setbacks over the past two weeks to get into the market at a favorable price.

Of course, the economic data situation in the US has improved once again since last Wednesday, so that the perception among many players that the US Federal Reserve is likely to have ended its cycle of interest rate hikes has once again been reinforced. Meanwhile, last week's ruling by the German Federal Constitutional Court, for example, according to which the coalition government will miss out on many billions of euros in its budget, has so far caused little uncertainty among stock market players in Germany - based on today's DAX level alone.

Private investors want much more

Nevertheless, the institutional investors we surveyed with a medium-term trading horizon reacted once again, causing our B?rse Frankfurt Sentiment Index to fall for the second time in a row - this time by 11 points to a new level of +17. The bull camp shrank by 8 percentage points, with the majority (just under 63%) contenting themselves with profit-taking and moving to the sidelines. The remainder of those willing to switch went straight to the bear side, turning previously bullish positions 180° to bearish.

The situation among private investors is almost somewhat static. The B?rse Frankfurt Sentiment Index of this panel is unchanged for the second time in a row at a level of +39, although the polarization between bulls and bears has increased (by 2 percentage points in each case). The bottom line, however, is that the vast majority remains loyal to the DAX. Perhaps also in memory of the rally in the fourth quarter of the previous year, which reached a level of over 20%.

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Gone to come back

With today's survey, the sentiment gap between private and institutional investors has widened further. While private investors are unlikely to have taken any significant profits on balance, more institutional investors have at least temporarily left the DAX rally. Probably with the intention of returning this year at a more favorable level, should the DAX produce a significant setback. We therefore expect initial demand from these sources in the range between 15,650 and 15,700 DAX points, demand that should support the DAX. The same applies to demand from long-term sources, which over the past two weeks is likely to have ensured that the losses of institutional investors had no impact on the DAX - the stock market barometer even rose by around 5.6% on the reporting date alone.?

At the same time, optimism among institutional investors has cooled to such an extent that it does not pose a major threat to the DAX. In fact, the DAX's sentiment has improved somewhat compared to the previous week.

Sentiment-Index of institutional Investors

Sentiment-Index of private Investors

22 November 2023, ? Goldberg & Goldberg for boerse-frankfurt.de

About the B?rse Frankfurt Sentiment Index

The B?rse 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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