Wednesday, August 12, 2020

Investors are heavily invested, increasing the risk of a setback

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Dusseldorf With regard to the stock market, investors are currently asking three questions: Has the worst survived on the financial markets? Is it time to buy the stocks that sold the most? Or should the recovery be used to make the portfolio crisis-proof for the next low blow?

Sentiment expert Stephan Heibel describes the current mood as “wait and see neutral”. The owner of the analysis house Animusx evaluates the weekly Handelsblatt survey on stock market sentiment, called Dax-Sentiment, among more than 3500 investors.

As long as the facts about the future easing measures and the economic effects do not become clearer, Heibel’s view should not see any major swings in one direction or the other: “Downside potential threatens during the reporting season, because company numbers will become the extent of the economic trend in the coming days and weeks Show damage to the quarantine measures. “

However, the sentiment analysis this week does not provide a clear recommendation to investors’ questions. “Gains in prices such as the opening on today’s trading day are an opportunity to sell one or the other position in the portfolio in order to have enough cash for subsequent purchases in the event of a setback,” says Heibel.

After the panic mood in March followed the bargain hunters, who are currently taking their speculative profits with them. Now the Dax has left its sales level again. If prices continued to rise, individual stocks and sectors would again be overvalued in Heibel’s view.

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Among other things, the investment quota is queried in his more extensive Animusx sentiment survey. This rate is already back at a relatively high level. Many investors are already heavily invested again, as the overbought constitution of the US stock barometer S&P 500 shows, which has risen too high too quickly. “This means that the possibility of a continuation of the recovery rally is limited in the short term, the risk of a setback is greater,” explains Heibel. Because if many investors are already heavily invested, few potential buyers remain.

Results of the current survey

Overall, the mood among investors is divided: relief on the one hand that Chancellor Angela Merkel has taken the path towards “easing”. Disappointment on the other hand about the moderate steps.

This can also be seen from the current results of the Handelsblatt survey Dax-Sentiment. The panicky mood of the previous weeks has evaporated, but nobody can really be happy about the low stock market level. The short-term sentiment is neutral.


In which cycle phase do you think the markets are currently in?

Information in percent


Accordingly, complacency is not yet back. Uncertainty remains a dominant feeling among investors, because politicians have only announced action “on sight”. How long will this exceptional situation last? Uncertainty about the answer to this question continues to cause great uncertainty among shareholders.

Investor expectations are also slipping further in the Handelsblatt survey. With a minus of 0.3 the bears dominate over the bulls for the first time since February. Because the hope for a quick end to the measures has been destroyed. Everyone will have to live with the special situation longer than we previously imagined.

Before that, investors hoped for a short shutdown followed by a violent restart including a backlog that should more than compensate for the losses in the second half of the year.


Have your expectations for the Dax been met in the past week?

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Since this hope has been destroyed, investors no longer want to invest. The willingness to invest has also decreased further. At the end of March, this sub-area of ​​the Dax sentiment reached a historic high of 5.8, since the start of the survey in September 2014, more investors than ever have been invested. Now this value has dropped to just 1.1.

Look at other indicators

The Stuttgart Euwax sentiment, in which private investors trade, has dropped to minus 11.4. That leads to the conclusion: They are buying more hedging products against falling prices again because they fear a second sell-off wave.

The professionals who secure themselves through the Frankfurt derivatives exchange Eurex, on the other hand, are betting on further rising prices. The put-call ratio has dropped to 0.8 and the average is 1.5. Institutionals have bought significantly more calls.


Which cycle phase do you expect in three months?

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In the weeks before, the hedging positions of investment professionals in the United States were significantly larger than in Germany. But the put-call ratio of the Chicago futures exchange CBOE is currently returning to a normal level.

The investment ratio in US fund manager shares rose only marginally from 27 percent to 29 percent and remains at a historically low level. US private investors remain pessimistic, the bull-bear ratio is minus eight percent.


Will you trade in the next two weeks?

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The “fear and greed indicator” of the US stock markets, calculated on the basis of technical market data, now shows a neutral state of the markets again with 44 percent. Other short-term indicators indicate that a correction in the US equity markets is imminent.

More: Exaggeratedly cheap: Analysts now see these 18 stocks as bargains

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