German shares are among the winners this year
By Alexander Dominicus
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The German DAX index has seen an upswing in 2023. Which factors are driving this ?
The strong upward movement of German shares in 2023 must be seen against the background of the weak previous year. Due to the greater dependence of German industry on gas, the index fell significantly, especially until September last year. However, the situation is now not as bad as feared. The economy is running reasonably robustly, and energy prices have also fallen significantly again. The reporting season has also gone well overall, so that German shares are rightly among the winners this year.
One of the sectors that has been particularly in demand in the first half of the year is, for example, the technology sector. It has performed well since the beginning of the year, with SAP dominating strongly in Germany. The automotive and industrial sectors, which are important for Germany, have also performed well and contributed to the strong performance of the DAX. On the other hand, the real estate sector continues to struggle this year due to the sharp rise in interest rates.
Outlook for German shares
German companies paint a predominantly positive picture for developments in 2023. Uncertainty in the capital markets remains high, especially on the topics of inflation, interest rates and economic development. Nevertheless, despite the strong increase since the beginning of the year, German shares in particular are still relatively cheaply valued, especially compared to US shares.
Small caps offer the greatest catch-up potential. The valuation difference between large- and small-capitalised companies is now historically high. This has not changed this year and offers attractive opportunities for stock pickers.
What could stop the upward movement of the DAX is the Fed's central bank policy. It could leave its mark on the US economy in the second half of the year. This could then also have a negative impact on German equities. However, we expect that inflation will continue to decline in the second half of the year, giving central banks more room to manoeuvre in the event of an economic slowdown.
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