The DAX index is on the verge of surpassing the 20,000 mark, driven by strong market optimism despite geopolitical and economic uncertainties. Fund manager David Wehner suggests that positive company earnings and external factors, particularly from the US and China, could support this growth. However, he warns of potential profit-taking and volatility around the upcoming US elections. Wehner highlights the disconnect between the DAX and the German economy, emphasizing the index’s reliance on global markets rather than local performance.
The DAX index continues to reach new heights, with the possibility of surpassing 20,000 points within a few days. Fund manager David Wehner from FGTC Investment shares insights on the driving forces behind this surge, potential gains for investors, and what lies ahead in the market.
What is your prediction for the DAX reaching 20,000 points soon?
According to David Wehner, the rise in stock markets this year is fueled by an overwhelming sense of optimism. Despite geopolitical tensions, economic uncertainties, and recent market fluctuations, investors remain confident that central banks are not anticipating a recession and are proactively addressing inflation through interest rate adjustments. The key factor now will be the corporate earnings reports for the last quarter. If major companies from the S&P 500 report positive results, this could further boost the DAX.
When do you anticipate the DAX will exceed 20,000 points?
If the current positive sentiment continues, it’s likely that the DAX could crack the 20,000 mark in the upcoming trading days. However, historically, profit-taking often occurs as markets approach significant milestones. With the US elections coming up in early November, some corrections may be seen as investors reassess their positions in light of potential economic developments.
Which sectors are currently thriving in Germany?
While the automotive and chemicals sectors are struggling, companies like Rheinmetall have seen gains driven by Europe’s defense initiatives. SAP has regained its status as a leading European entity, and the consumer sector is also rebounding, with brands like Adidas making notable recoveries.
Do you think the top-performing stocks will continue to grow, or have they peaked?
Prominent players such as SAP may continue to rise, having adapted their product offerings and embraced artificial intelligence. The defense sector is becoming increasingly significant as geopolitical tensions persist, highlighting Europe’s need to bolster its strategic capabilities.
What should investors consider now — is it wise to buy shares at this moment?
As we enter the final quarter of the year, many investors hope for a year-end rally, which often occurs. However, for those already invested, increasing their exposure may not be necessary. It could be prudent to secure profits as the DAX approaches 20,000 points. If your portfolio is fully allocated to equities, consider reducing it to 80% and observe the market dynamics post-election. Volatility may present opportunities to purchase shares at lower prices, optimizing potential returns. Rather than fear missing out, maintaining a steady approach can be beneficial. Past market behavior, such as the significant dips seen in August and September, underscores the importance of strategic decision-making.
With over one billion euros under management, how is your firm investing currently?
Presently, our equity allocation is more defensive than usual. Clients who previously held a 100% equity position have now adjusted to about 80 to 85%. Recently, we have shifted focus towards bonds and precious metals like gold.
Given the stagnation of the German economy, what explains the DAX’s remarkable performance?
The DAX no longer mirrors the actual state of the German economy. Financial markets globally have diverged from traditional economic indicators. Historically, market capitalization was closely linked to GDP; that changed post-financial crisis when liquidity surged, inflating stock values to around 200% of global GDP. If the DAX were accurately reflecting Germany’s economic health, we would see levels closer to what we had before the pandemic.
What factors are actually driving share prices now?
The DAX’s performance is largely influenced by global markets. Given its export orientation, the index is significantly affected by the economic conditions in China and the US. Recent economic stimulus measures in China have resulted in benefits for German stocks, and the US continues to be a crucial growth driver this year. The overall outcome in Europe has also surpassed growth expectations.
Could ongoing trade tensions between China and the US hinder the DAX’s progress?
Current trade issues, particularly concerning the automotive sector, are already reflected in stock prices, which have adjusted accordingly in recent months. The outcome of the upcoming US elections will be critical. If Trump wins and enforces his protectionist agenda, it could negatively impact Germany’s export-driven economy. However, such scenarios are viewed as extreme given Trump’s limited ability to fulfill all campaign promises during his previous term.
Which candidate are investors leaning toward currently: Harris or Trump?
Currently, investors appear to favor Trump, given that