The German economy is currently showing two faces: on the one hand, many indicators point to recession, bad news is the rule rather than the exception, companies are missing targets and laying off employees. And on the other hand, the German share index is rushing from record to record. "On the one hand, this can be explained by the strong international focus of the major German companies represented in the Dax," says Mathias Beil, Head of Private Banking at Hamburg-based Sutor Bank. "But what is more decisive is that the stock markets are relying on help from the central banks - and companies do not want to rely on this support.
Poor economic data and new stock market records
The week on the stock markets was dominated by poor economic data in Germany and new records for the DAX. Germany is now threatening to finally fall into recession, partly due to the downgraded economic expectations. "The inverse interest rate structure has been warning of this for a long time," says Beil. The Purchasing Managers' Index in Germany has also surprisingly fallen by 0.9 points to 46.1 points. “This means that companies are taking a weaker view of the economy.”
Consequently, companies are reacting and announcing strategic course corrections. Mercedes-Benz withdraws its self-imposed electric targets, BASF cuts numerous jobs in Germany and Bayer reduces its dividend to a minimum and offers employees generous severance payments if they leave the company. MTU Aero Engines is preparing its shareholders for lean years and reducing its dividend, as lengthy inspections of defective engines cost time and money. "The companies are acting as cautious businessmen do in view of the uncertain data: cautiously," says Mathias Beil. "Then there are the very high wage settlements, which are also creating pressure." This is a mixed situation that would lead one to expect weaker share prices.
But the stock market sees things differently, the DAX climbs to new highs - and is in good company. The Japanese Nikkei index reaches a new all-time high and overcomes the old highs reached 30 years ago. The US stock markets also continue to run at full speed. One reason for this is the hype surrounding artificial intelligence. Nvidia has electrified the markets with its business figures. The share price rose by double digits in after-hours trading on Wednesday and confirmed this on the markets on Thursday. This means that one of the so-called "glorious seven" has already gained 56 percent this year. Does this mean the direction is clear? "Probably not," explains Beil. "A favorite child from the cybersecurity sector, the company Palo Alto Networks, has not lived up to the high expectations and has lost around 30 percent in a short space of time."
Nevertheless, the stock markets remain optimistic and trust in the power of the central banks. "In the coming weeks, it will depend on how quickly the interest rate hopes are fulfilled by the central banks," says Beil. "If this expectation remains unfulfilled, we will see corrections on the stock markets." These may well be severe, but they will then form the basis for a positive stock market year in 2024, as stock markets and companies will be looking in the same direction again.
