More bullish signals for European equities!

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Written by Sebastian Wanke | 22 June 2015
Posted in Special research

The sentix data universe makes it clear: investors commit in an increasingly strong manner to European shares. For instance, they currently plan with an investment horizon which was never longer than today. In addition, stock market participants behave rather anti-cyclically at the moment. Both is positive for the asset class.

In June, the sentix indicator regarding the time horizon when investing in stocks falls to a new record low (see graph on the left-hand side). This means that investors’ intended holding period when buying stocks was never longer than today (since inception of the indicator in 2004) which underscores the outspoken resistance of the European equity market. And it also makes a strong case for the asset class.

20150623 iif horizon eng20150623 iif horizon procyclic eng

Furthermore, this month the sentix index concerning pro-cyclical equity strategies falls, too (see right-hand graph). Consequently, stock investors again act more anti-cyclically. As their basic conviction has just risen, this also has to be seen as a strong commitment – because it shows that investors want to buy stocks again in the current correction. Overall, bullish signals for European stocks thus intensify!

Background

“sentix Styles Index: investment horizon for stocks” is polled around every third Friday of a month as part of the sentix Global Investor Survey. The indicators’ history dates back until 2004. The index shows if equity investors operate with a rather short-term or a rather longer-term view. A longer-term view indicates stronger conviction and thus higher tolerance for losses. The indicator reflects investors’ medium-term expectations and, as a result, often leads market developments.

Jointly with the above-mentioned indicator “sentix Styles Index: pro-cyclical strategies (equities)” is regularly polled on a monthly basis. This indicator shows if investors tend to be more pro-cyclical or more anti-cyclical in their investment behaviour. A high degree of pro-cyclical behaviour is usually a hint for investors focusing too much on price developments which points to a risky environment. A high degree of anti-cyclical conduct, in contrast, signals that value perception comes to the fore – which typically is positive.

The current sentix Sector Sentiment survey was conducted from June 18 to June 20, 2015. 1020 individual and institutional investors took part in it.

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