German Stock Market Surges: Low Expectations, US Exposure, and Election Boost

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Stock Market,Germany,Economy

Despite initial pessimism, the German stock market has experienced a remarkable surge this year, driven by several key factors. Analysts point to low starting valuations, exposure to the strong US economy, and the prospect of upcoming snap elections as contributing to the positive performance.

Several factors have contributed to the growth of the German stock market this year, according to analysts. These include low initial expectations, exposure to the US economy, and the upcoming snap election. Sabrina Reeh, senior portfolio manager at DWS, noted that valuations were relatively low at the start of the year and sentiment was muted, but earnings ultimately exceeded expectations.

Maximilian Uleer, head of European equity and cross asset strategy at Deutsche Bank, highlighted that SAP's performance has significantly boosted the German market, contributing 8% to its year-to-date gains. The company's shares surged nearly 59% this year, reaching an all-time high in late October after raising its full-year targets and reporting strong cloud business results. Uleer also pointed out that DAX companies generate a larger share of their revenue in the US than in Germany, and a significant portion of this revenue is likely unaffected by potential tariffs. Although the collapse of the German government in November came as a surprise, analysts see the potential for a positive impact on equities. Snap elections are viewed as an opportunity for structural reforms and increased spending, potentially through shifts in government spending priorities or a higher fiscal deficit. This is particularly relevant as manufacturing, a key sector of the German economy, has struggled throughout 2024. The latest PMI data showed further contraction in the sector during December

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