FRANKFURT (dpa-AFX) - DZ Bank is questioning whether the recent strength of German stocks will continue. "The DAX has been on a roll for several months," wrote analyst Soren Hettler. The index is now in the "expensive" range and therefore harbors increasing risks of a setback. In 2025 alone, the German benchmark index has risen by 22 percent, while its otherwise leading US counterpart, the Dow Jones Industrial, is down slightly.
According to Hettler, there are plenty of stumbling blocks, primarily stemming from the policies of US President Donald Trump. He also sees a "significant flaw" in current valuation ratios, including the price-earnings ratio. There is no sign of support from earnings expectations, he said.
Hettler points out that, as things stand, the DAX has managed to outperform the broad-based New York S&P 500 for four consecutive quarters for the first time since its creation in the late 1980s. Looking back, it has been quite some time since the German benchmark index stood out positively over a longer period of time. "Since the financial crisis, the DAX has often lagged behind its US and European counterparts," he said.
The DAX euphoria is mainly driven by the change of government in Germany and the announced investments in defense and infrastructure. "The majority of market participants clearly believe that Chancellor Merz's government is capable of making both the Bundeswehr and the German economy competitive again and of spending the available funds in a sensible and targeted manner," wrote the expert.
Looking ahead, the chances remain good "that the pendulum will swing in the other direction in terms of business development and margins in the coming years." In the long term, Hettler therefore sees an opportunity for German indices to keep pace with their US counterparts. /tih/ag/mis
