Home Business European Retail Investor Sentiment Risk-Off in July

European Retail Investor Sentiment Risk-Off in July

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  • Spectrum sentiment indicator turned more bearish across all major equity indices in July
  • SERIX index on gold reached 114 this month, a continued bullish response by retail investors
  • 114.2 million securitised derivatives were traded on Spectrum Markets in July

Spectrum Markets, the pan-European trading venue for securitised derivatives, has published its SERIX sentiment data for European retail investors for July (see below for more information on the methodology), revealing retail investors leaned towards a risk-off approach, as the data reflects a bullish sentiment on gold and bearish sentiment on equities.

Retail investor sentiment on nearly all major equity indices became increasingly bearish in July, as the number of those who took bearish exposure on equity indices or sold their long stakes, outnumbered investors taking long exposure or selling bearish positions. This trend can be seen in relation to both European and US indices underlyings available on Spectrum. Additionally, the bullish sentiment towards gold continued this month, as it reached 114 points.

“As the well-known affirmation goes: ‘sell in May and go away’, and July’s bearish SERIX sentiment towards European and US equity markets seems to support this theory. This could be due to two factors: firstly, some retail investors may have realised their profits following the rally we saw towards the end of June. Secondly, some investors may be anticipating a market cycle approaching its end,” explains Michael Hall, Head of Distribution at Spectrum Markets. 

“The change in sentiment could also reflect current geopolitical and monetary uncertainty, as central banks have used aggressive monetary tightening as a way out of high inflation. However, many corporations are still reporting good quarterly earnings and we are seeing relatively low unemployment across the UK, Europe and the US,” Hall adds.

“Since the reporting season is not yet finished and Russia continues its war in Ukraine, which is placing further pressure on supply-chains and exacerbating the energy crisis, it is no surprise to see retail investors are once again reaching for the safe haven gold, which has increased to a SERIX sentiment of 114 in July compared to 108 last month”, says Michael Hall.

In July 2022, 114.2 million securitised derivatives were traded on Spectrum, with 35.7% of trades taking place outside of traditional hours (i.e., between 17:30 and 9:00 CET).

88% of the traded derivatives were on indices, 4.1% on commodities, 6.6% on currency pairs, 1% on equities and 0.3% on cryptocurrencies, with the top three traded underlying markets being DAX 40 (30.3%), S&P 500 (24.7%) and NASDAQ 100 (10.1%).

Looking at the SERIX data for the top three underlying markets, the DAX 40 shifted down to a bearish 99, from 103 last month. Meanwhile, the S&P 500 decreased to 95 from 104 and NASDAQ 100 saw a similar decrease, from a neutral 100 to a bearish 97.

Calculating SERIX data

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

The index is calculated on a monthly basis by analysing retail investor trades placed and subtracting the proportion of bearish trades from the proportion of bullish trades, to give a single figure (rebased at 100) that indicates the strength and direction of sentiment:

SERIX = (% bullish trades – % bearish trades) + 100

Trades where long instruments are bought and trades where short instruments are sold are both considered bullish trades, while trades where long instruments are sold and trades where short instruments are bought are considered bearish trades. Trades that are matched by retail clients are disregarded. (For a detailed methodology and examples, please visit this link).

 

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