Home Finance Retail investors more bullish on equity indices at year end

Retail investors more bullish on equity indices at year end

by uma
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  • SERIX sentiment indicator for all US and European equity indices trended bullish in December
  • Trading likely driven by expectation of ‘December bounce’ and short-term profit-taking
  • 116 million securitised derivatives were traded on Spectrum last month

Spectrum Markets, the pan-European trading venue for securitised derivatives, has published its SERIX sentiment data for European retail investors for December, revealing a year-end bounce in sentiment towards all European and US equity indices. The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment, and a number below 100 indicating bearish sentiment. (See below for more information on the methodology).

“We tend to see a bump in bullish activity around October as investors look for markets to recover after what is often a quieter period during the summer, but this year it came in during December. This could be due to the global crisis and volatile markets, with many investors feeling unsettled and entering the market a little later than usual,” says Michael Hall, Head of Distribution at Spectrum Markets.

“A few weeks before the end of the year, many forecasts had predicted a rally in the run-up to Christmas and some economic data in early December also came in better than expected. Despite persistently high inflation in Europe and the US, corporate earnings expectations have remained stable, leading some commentators to hope that the coming recession will be milder than originally thought,” says Hall.

This combination of factors likely contributed to some of the bullish exposure Spectrum saw retail investors taking towards equity indices in December, though there was also some profit-taking on the short plays, as investors benefitted from downward price swings during the month.

In December 2022, 116 million securitised derivatives were traded on Spectrum, with 36% of trades taking place outside of traditional hours (i.e., between 17:30 and 9:00 CET).

80.5% of the traded derivatives were on indices, 7% on commodities, 10.8% on currency pairs, 1.6% on equities and 0.1% on cryptocurrencies, with the top three traded underlying markets being DAX 40 (24.4%), S&P 500 (20%) and NASDAQ 100 (16.4%).

Looking at the SERIX data for the top three underlying markets, the DAX 40 shifted from a bearish 96 to a neutral 100. S&P 500 shifted from 98 to a bullish sentiment of 103. The NASDAQ 100 saw a similar turn from a neutral 100 to a bullish 103.

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. 

 

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