Stock market outlook 2025: “The DAX is in for a bumpy start to the year”
Will the soaring stock markets continue uninterrupted in 2025? Many experts are skeptical, especially for the first few months of the new year. However, German mid and small caps should be worth a closer look.
30 December, 2024 FRANKFURT (Frankfurt Stock Exchange). After a stock market year characterized by record highs in 2024, many players expect the stock markets to perform less well in 2025. The start in particular could be bumpy. “The markets are facing a turbulent start to the year”, predicts LBBW with a view to the ‘resurgence of the US budget problems’. According to Head of Research Berndt Fernow, the DAX is likely to fall to 19,000 points by the end of the first quarter and only recover in the second half of the year. However, geopolitical conflicts, higher inflation and fewer interest rate cuts in the US should limit the upside potential even then. “A trade war with China would make the situation even more complex”. The LBBW analyst therefore only sees the DAX reaching 20,000 points by the end of next year.
A look at the second tier can be worthwhile
Financial journalist Olaf Hordenbach, who has been self-employed for 17 years, is also anything but euphoric about Germany's leading index. “The bottom line is that we will be happy at the end of 2025 if the DAX has been able to maintain its level, not much more can be expected.” The stock market expert, who a year ago predicted that the DAX would jump above the 20,000 point mark, believes that there is a lack of growth fantasy in Germany, which could “drive shares forward” alongside falling key interest rates. Nevertheless, he finds “some very interesting industrial stocks” from the MDAX and SDAX exciting, “which are not so dependent on exports, which are therefore not directly affected by Trump's trade tariffs and which play along with the important issues of the time”.
German outperformance in “years of 5”
The new US president's second term of office, which officially begins on January 20, also plays an important role in the “Wave Rider Annual Outlook 2025”. “The dark side of politics with rising inflation expectations will stress investors at the beginning of his term of office”, fears Robert Rethfeld and expects a ‘correction that will last for almost the entire first quarter’ at the beginning of the new year. However, the DAX and, in particular, the MDAX and SDAX could show relative strength in 2025 due to the “downbeat sentiment”. “Germany's series of outperformance in a 5-year period is thus continuing,” says Rethfeld, referring to the pattern observed in 2005 and 2015 in particular. The underperformance of German mid and small caps should come to an end in the coming year “thanks to an improvement in the economic situation and new political impetus”. The recent increase in takeover activity in this segment already indicates “that strategic investors are recognizing attractive entry levels”.
21,500 points as year-end target
DZ Bank is optimistic about the DAX over the next twelve months. The year-end target of 21,500 points implies a price increase in the high single-digit range. After a “bumpy” start with a mid-year target of 19,500 points, “the stock and financial markets should gradually get used to the new US president”. Sören Hettler from the research team assumes that “other topics, including corporate earnings, monetary policy and artificial intelligence, will then come to the fore again”. However, in view of geopolitical uncertainties and Trump's expected erratic leadership style, more volatility on the stock markets is to be expected.
“No exaggerated yield expectations”
From a technical perspective, HSBC believes that the situation is not as positive as in the previous year. Chart expert Jörg Scherer describes the situation at the turn of the year as “diffuse and double-edged” and therefore warns against exaggerated yield expectations. He sees the “fundamental upward trend” in most share indices as positive, which in the case of the DAX generally allows for price targets in the region of 21,000 points. However, this is unlikely to be a self-runner. “Despite the intact bullish trend, the fall height for the bulls is increasing”. With the low market breadth in Germany and the very high level of optimism among investors, the technical analyst cites two warning signals to watch out for. In the event of a possible correction, especially at the beginning of the year, investors should pay attention to last year's high of 17,000 points, “which should not be undercut in the future as a strategic stop-loss”.
By Thomas Koch, 30 December, 2024, © Deutsche Börse AG
About the Author
Thomas Koch is a CEFA investment analyst, investment specialist for structured products and a certified certificate consultant. He has been a freelance journalist covering events on the capital markets since the beginning of 2006.
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