Over two years of actual recession and one year of zero growth, the DAX has surged — 20% in 2023, 19% in 2024, and 8% year-to-date.
The index is extremely overbought. Markets can stay in this state much longer than most expect, but this case is pushing the limits.
The DAX seems unaffected by Germany’s economic slowdown, largely due to the global presence of its “Magnificent Seven” (Allianz, Deutsche Telekom, Merck, Munich Re, Rheinmetall, SAP, and Siemens Energy), which generate only 19% of their revenue from Germany.
Yet, paradoxically, the index could still climb further. Goldman Sachs suggests that government stimulus (such as tax cuts) could significantly boost market sentiment:
“Beyond the direct impact of additional government support, the shift in rhetoric on European economic growth could be even more crucial. A move toward fiscal reforms in Germany—Europe’s largest economy, known for its frugality—could send a strong signal, improving sentiment, encouraging regional spending, and driving productivity higher.”