The German share index is soaring - expert speaks of "greed in the market"

Private investors invest around three times as much in equity funds as they did last year.

Stock market experts warn of the market overheating.

Frankfurt - For six days in a row, the German share index (DAX) reached a new high last week.

On Friday, concerns about the order situation due to the corona pandemic initially slowed the leading index.

Goldman Sachs boss Solomon considers the current development in the stock market to be "unsustainable".

DAX at highs: Goldman-Sachs CEO speaks of "greed in the market"

The German share index reached its all-time high of around 16,290 points on Thursday after an almost seven-week rally, after cracking one all-time high after another six days in a row. On Friday, concerns about the corona pandemic made investors cautious. The increasing incidences in Germany and the measures in neighboring Austria raised concerns about a renewed lockdown in Germany and its economic consequences. BayernLB expresses the fear that the "upswing could go into hibernation."

This also affects many private investors. They put $ 865 billion in equity funds around the world this year, about three times more than last year. This comes from data from EPFR as reported by the

. David Solomon, head of Goldman Sachs, is concerned about the growing greed in the market. In his 40-year career there have been times “when greed has far outstripped fear. We are in one of those phases, ”said Solomon during an interview at the Bloomberg New Economy Forum in Singapore on Wednesday. "In general, my experience has shown that these periods don't last long," he said, lowering expectations.

"Be greedy when others are fearful, be fearful when others are greedy," is a famous motto of investor legend Warren Buffett. Is this to be understood as a warning to private investors?

“Fear & Greed” index

is currently on “Greed”, a week ago the assessment was “Extreme Greed”. It is worth keeping an eye on other indicators as well: the volatility index VIX, for example, which is considered stable at a value below 20. It is currently below that, the high in the previous week of trading was around 18. But in September the index rose to 26.5, its highest level since May, and its annual high in January was 37.

If the fear index VIX rises, so experts believe, this indicates fears of investors in the market, the stock index S&P 500, which underlies the VIX falls - and with it other values.

This is not always true, because volatility does not mean a downturn, but the volatility index is always an indicator.

In the coming year, share experts should again expect values ​​above the stability mark of 20, as reported by the

.

Greed of private investors or lack of alternatives?

Assuming that private investors are only greedy is perhaps not enough. Many experts believe that there is simply a lack of alternatives. We are in a historic phase of low interest rates, the ECB's monetary policy is loose and the money supply is higher than ever before. The head of the Deutsche Bundesbank, Jens Weidmann, recently took off his hat surprisingly. He was considered a “hawk” who advocated a stability-oriented monetary policy. As he said goodbye, he warned that the ECB should “not lose sight of the dangers of inflation [...]. But in October consumer prices in Germany rose by 4.5 percent compared to the same month last year, inflation thus reaching its highest level in 28 years. Not only do savers no longer receive interest, they practically lose money if they leave it in the account.Many therefore invest in the stock market.

This seems like a logical conclusion, but caution is still advisable. Or to put it in the words of the Goldman Sachs boss: “Everyone feels pretty smart right now because most of the things you invest in increase. It doesn't usually work that way, ”he said. His experience tells him that this is not sustainable.

Nevertheless, investors do not seem to have acted completely headless: Many switched to shares of the

pandemic winners

on Friday

.

These include values ​​from the tech industry and so-called “stay-at-home shares”.

These include Dax members Delivery Hero, Zalando and Hellofresh with increases of between 1.3 and 4.1 percent.

If you stick to stock market legend Warren Buffet, investors should only invest long-term anyway.

He once said that he buys out of conviction, "so that he doesn't care whether the stock exchange is closed for the next five years or not."