Germany's stock market is significantly outperforming its European counterparts this year, mirroring the performance of U.S. equities. The key index, the DAX 30, has surged approximately 19% year-to-date, while the European benchmark, the Stoxx 600, has only climbed 5%. These gains in Germany align closely with the performance of the U.S. market, where the S&P 500 has risen about 23% year-to-date.
Analysts attribute these positive trends to several factors, including low initial expectations, strong exposure to the U.S. economy, and the upcoming snap election. Sabrina Reeh, senior portfolio manager at DWS, highlighted that valuations were relatively low at the beginning of the year and sentiment towards German equities was subdued. However, earnings ultimately exceeded expectations. A key driver of the German market's success is SAP, whose shares have soared nearly 59% this year, contributing 8% to the DAX's year-to-date performance, according to Maximilian Uleer, head of European equity and cross asset strategy at Deutsche Bank. In late October, SAP shares reached an all-time high after the company raised its full-year targets and reported robust results for its cloud business. CEO Christian Klein expressed confidence in the company's outlook, emphasizing their progress in Business AI. The performance of German equities is also linked to their exposure to the U.S. market. DAX companies generate a larger share of their revenue in the U.S. compared to Germany. Despite concerns about potential tariffs, a substantial portion of this revenue is generated locally and is likely exempt from tariffs, as noted by Deutsche Bank's Uleer. Although the collapse of the German government in November came as a surprise, analysts believe this development could ultimately benefit equities.
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