Germany’s Stock Market: Insights and Future Outlook

Germany’s stock market has significantly outperformed its European counterparts in 2024, with the DAX 30 rising approximately 19% year-to-date. This impressive growth stands in stark contrast to the European benchmark, the Stoxx 600, which has only increased by 5%, and mirrors the strong performance of the U.S. S&P 500, which has surged about 23% over the same period.

Several factors contribute to this notable performance. Analysts attributed the gains to initially low expectations at the beginning of the year, as well as a strong exposure to the U.S. economy. This exposure has allowed German companies to benefit from higher revenue generation in the U.S. market. Furthermore, earnings developments have exceeded expectations, contributing to a more favorable market outlook.

A standout performer in this landscape is SAP, whose shares have skyrocketed nearly 59% this year. This remarkable increase has had a substantial impact on the DAX, accounting for approximately 8% of its overall performance. In late October, SAP reached an all-time high after raising its full-year targets and revealing robust figures from its cloud business. CEO Christian Klein expressed confidence in the company’s trajectory, highlighting its progress in Business AI.

The political landscape in Germany also plays a crucial role in shaping market sentiment. The recent collapse of the German government, though unexpected, could offer a silver lining for equities. Analysts note that snap elections may present an opportunity for structural reforms and increased government spending. DWS’ senior portfolio manager, Sabrina Reeh, indicated that while the political agenda remains uncertain, potential reforms, such as easing regulations and relaxing the strict debt brake, could enhance market sentiment.

However, challenges lie ahead. Analysts have expressed concerns regarding the potential impact of U.S. tariffs, particularly those threatened by President-elect Donald Trump. Such tariffs could exacerbate difficulties for Germany’s auto sector, which is already facing headwinds.

Source: CNBC