Germany's Stock Market Soars Despite Economic Woes

A handful of companies dubbed Germany’s answer to the US “magnificent seven” have driven a strong rally in the country’s stock market this year, defying the gloom enveloping the domestic economy. Frankfurt’s Dax, an index of 40 blue-chips, has risen 18.7 per cent this year, beating the benchmarks in France and the UK, and far outstripping the region-wide Stoxx Europe 600 index’s 4.8 per cent gain.

The performance comes in spite of weak domestic growth and political turmoil, with Germany’s unpopular coalition government collapsing in November after the parties were unable to reach an agreement over reforms to a fiscal “debt brake”, and the country now heading for a snap election in February. Meanwhile, the economy is expected to expand by just 0.6 per cent in 2025, down from 1.2 per cent predicted midway through the year, according to economists polled by Consensus Economics. This marks the largest reduction in forecast growth over the period of any major industrial economy. The Dax’s performance “has been a surprise”, said Timothy Lewis, a portfolio manager at JPMorgan Asset Management, and “serves as a great example of the adage that stock market and economic performance are not one and the same”. Dax constituents derive less than a quarter of their earnings from within Germany, which has helped provide a buffer against tremors that have, for instance, seen automotive giant Volkswagen set out plans to lay off tens of thousands of workers and shutter several factories. This year’s bumper stock market returns have largely been driven by seven companies: software giant SAP, defence stock Rheinmetall, industrial conglomerate Siemens, Siemens Energy, Deutsche Telekom, and insurers Allianz and Munich Re. SAP alone accounts for nearly 40 per cent of the Dax’s gains, with its shares up more than 70 per cent on the back of its transitioning of business customers to the clou

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