DAX at full speed despite the German economy
The situation of the German economy continues to be a cause for concern, but the country’s main stock list, the DAX, continues to be among the best in the region.
We start as usual with a relative strength ratio. The chart above compares the German DAX with the pan-European Stoxx 600 index. The chart’s surge since last summer confirms how Frankfurt has rallied in recent months, bringing home a return of more than four percentage points.
There are several reasons behind a movement that seems at odds with Germany’s delicate economic situation. Firstly, it should be remembered that many of the companies on the German stock exchange generate most of their revenues outside the country, making them less exposed to weak domestic demand. Secondly, the presence in Frankfurt of leading companies in hot sectors such as technology (such as SAP), energy (Siemens Energy) and defence (Rheinmetall AG) should be mentioned. Added to this are technical reasons and an improving investor expectation thanks to a less restrictive monetary policy and falling inflation.
The performance of the DAX is also clearly visible when comparing the performance of the German index with that of the Dow Jones Industrial. As can be seen in the chart above, the relative strength indicator has recovered from last November’s lows, moving up to May’s levels and back above the long-term average.
