The European stock exchanges are always starting to show signs of recovery.

That was the case last Friday, as well as on Monday and Tuesday.

It went up and down on Wednesday.

For Christoph Witzke, fund manager at Deka, this can be explained.

"The rationale behind this is that investors are assuming a recession is starting and have largely priced this in accordingly." So all it takes is "no bad news" for prices to rise again.

But that doesn't change the negative mood.

The Dax and the European stock exchange barometer Stoxx Europe 50 have fallen by almost 20 percent since the beginning of the year.

Archibald Preuschat

Editor in Business

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And investor sentiment is bad, measurably bad, as Christian-Hendrik Knappe from the Spectrum Markets trading venue knows.

The Spectrum European Retail Investor Index (SERIX) uses the trading venue's pan-European data to shed light on investor sentiment towards current developments in the financial markets.

The transactions made by private investors are analyzed on a monthly basis and the proportion of orders with a falling trend is subtracted from the proportion of transactions with a rising trend.

Buying long instruments and selling short instruments are counted as rising orders.

Selling long instruments and buying short instruments are attributed to the bearish trend.

“Both the Dax and the Euro Stoxx 50 dipped below the tipping point of 100,” says Knappe.

But he also recognizes that the Dax is still doing very well with its plus/minus 13,000 point level.

"The investors are crisis-tested, whether the financial crisis or the corona pandemic," says Knappe, who worked as a stock exchange trader for eight years.

In addition, there is still an investment emergency.

So what to do with the money?

Use the fallen courses as an entry opportunity?

Knappe is skeptical: "You should invest a part now, but also keep a part in cash." Because Knappe is convinced: "We still see a lot of question marks, but I don't think that the worst is behind us." Witzke von the Deka shares his opinion.

"We have seen a continuous downward movement, but no crash - and that may well still come."

It is still the uncertainty about the gas supply that is spoiling the mood of German investors in particular.

But if it turns out that Russia is actually turning off the gas supply to Germany, there will be consequences.

Frank Klumpp, equity strategist at Landesbank Baden-Württemberg (LBBW), also thinks the market hasn't fully priced in the possibility of a gas freeze.

"It's seen more as a 50:50 chance." However, should the supply of Russian gas be stopped, Klumpp sees the medium-term setback potential for the Dax at more than 20 percent.

“It shouldn't come as a surprise if the Dax falls back to its book value, as it did in previous phases of the crisis.

This is currently around 10,000 points.”

“The quarterly numbers should probably be pretty good”

On the other hand: If it becomes clear that the gas supply is secure, LBBW's equity strategist also believes that a rally is possible.

At the same time, he warns: "The other burdensome framework conditions are not yet off the table." For Knappe, the markets remain "susceptible to shocks - in all directions".

Witzke and Knappe also see the Dax at the end of the year at 11,000 rather than at the current level of 13,000 points.

"It remains to be seen where we will end up, maybe there will also be a Christmas rally," says Witzke.

Be that as it may: Knappe believes that the impact of the reporting season that is now beginning in Europe should remain limited.

"The quarterly figures that come in should probably be pretty good," says Klumpp, although he expects the outlook to be cautious.

Ulrich Stephan, chief investment strategist for private and corporate customers at Deutsche Bank, sees analysts expecting a jump in profits and sales of almost 22 percent compared to the previous year, driven by the oil and gas sector.

With the exception of declines in real estate, financials and stagnation in technology, the other sectors could see dynamically growing profits, up 15 to 23 percent, Stephan said in a publication on Tuesday.

Knappe also advises not just looking at the numbers: