On the first Monday of each month, before most major economic data has been released, traders get an early snapshot of how investors feel about Europe’s economy. It comes from the Sentix investor confidence index, a survey that is quick, simple and often one of the first signals that mood is turning. It rarely moves markets on its own, but it is a useful part of the monthly picture.
What the Sentix index is
Sentix is a Frankfurt-based research firm that surveys investors on their view of economic conditions. Its best-known product is the investor confidence index for the eurozone. The survey asks a large panel of private and institutional investors, typically more than a thousand, how they assess the current economic situation and what they expect over the next six months.
The answers are turned into three figures: an overall index, a current situation index and an expectations index. Positive readings mean more investors are optimistic than pessimistic; negative readings mean the reverse. The overall index combines the other two.
Why it comes out so early
The survey is conducted in the days just before publication, and results are released on the first Monday of the month, usually at 9:30am UK time. That makes Sentix one of the first eurozone sentiment indicators each month, ahead of the German ZEW survey, the Ifo business climate index and the purchasing managers’ indices.
Because it is so timely, Sentix can capture sudden shifts in mood after major events, such as a market sell-off or a geopolitical shock, faster than official data. That is its main value.
How traders use it
Traders watch Sentix as an early signal for the euro and European shares. A sharp improvement can support the euro and lift European equities, particularly cyclical sectors such as banks, industrials and carmakers. A sharp deterioration can weigh on both.
The expectations component often gets the most attention because it looks ahead. If expectations improve while the current situation stays weak, investors may be betting on a recovery. If expectations fall while the current situation holds up, they may see trouble coming.
Sentix is also used to cross-check other surveys. If Sentix, ZEW and the PMIs all move in the same direction, the signal is stronger. If they diverge, traders look for the reason. Our guide to how services and manufacturing PMIs differ explains how business surveys fit into the same picture.
Its limits
Sentix measures the mood of investors, not the actions of businesses or consumers. Investors can be swayed by market moves: a strong week for shares can lift sentiment even if the economy has not changed. That means Sentix can sometimes reflect markets rather than predict them.
The headline number also tends to have a smaller market impact than releases such as inflation figures or central bank decisions. Most of the time it is a background signal rather than a market-moving event. The exception is when it moves sharply and unexpectedly, especially at a time when markets are already nervous.
Finally, sentiment surveys can be volatile from month to month. Trends over several months are usually more informative than a single reading.
Sentix beyond the eurozone
Although the eurozone index is the headline, Sentix also publishes sentiment readings for other regions, including Germany, the US, Japan and parts of Asia. These allow comparisons of investor mood across economies. Sentix also runs surveys on investor positioning and risk appetite, which some traders use to judge whether markets are crowded.
Putting it in context
Sentix works best as one piece of a wider monthly picture. Combined with other sentiment measures and hard data, it helps build a view of whether European growth is improving or weakening. For UK traders, it is also a useful check on conditions in the UK’s largest trading partner. Moves in the euro feed through to sterling, as covered in our guide to the EUR/GBP pair for beginners.
The bottom line
The Sentix investor confidence index is an early monthly reading of how investors feel about the eurozone economy. It is timely and simple, but it reflects investor mood rather than hard activity and works best alongside other data. If you want to test how well you use economic indicators, take the free Samuel & Co trader assessment.
