Weekly outlook: ”21,000-point mark will be a long time coming”
Is the record rally coming to an end? At least from a technical point of view, there is a lot to be said for it. Fundamentally - and in the longer term - however, many see the stock markets continuing to rise, including the DAX.
9 December 2024 FRANKFURT (Frankfurt Stock Exchange). Record after record. “On the stock markets, the prospects of interest rate cuts in the USA and the eurozone, coupled with a robust US economy, had a price-boosting effect,” explains Sebastian Neckel from Deutsche Bank.
On Friday, the DAX rose to a new all-time high of 20,425.90 points, reaching 20,385 points at the close of trading. This represents an increase of 22 percent since the beginning of the year. This clearly sets Germany apart from Europe as a whole: the Euro Stoxx 50 and Stoxx Europe 600 are up “only” 10 and 9 percent respectively. The S&P 500 and Nasdaq 100 also climbed to new highs on Friday, while the Dow Jones remained slightly below them. The S&P 500 has thus risen by 28% this year, the Nasdaq 100 by 31%. Things are a little quieter at the start of the new week, with the DAX standing at 20,400 points on Monday morning.
“The air is getting thinner”
Chart technicians now warn “As in August, the leading German index was able to make strong gains in a short period of time. The start of September was then characterized by profit-taking,” notes technical analyst Christoph Geyer. Profit-taking should therefore come as no surprise. “The seasonality shows a small downward bend for this week before the final spurt at the end of the year,” explains Geyer. The overbought indicators also suggest that the current upward momentum is unlikely to be sustained. “It will therefore be some time before the next major round mark of 21,000 points is reached.”
According to Ulrich Wortberg from Helaba, the technical indicators also suggest a breather. “The market has become overbought,” he explains. In this respect, the air could gradually become thinner and investors could be encouraged to take profits before the end of the year.
Moderate price gains expected for DAX
Ulrich Kater from DekaBank points out that the new record highs are accompanied by higher valuations. “The most recent reporting by DAX companies was disappointing,” explains the chief economist. The structural challenges for German companies remain high with the new US administration and the new elections in Germany. However, the faster and clearer the new governments communicated their plans, the better companies would be able to adapt to changing conditions. “In the past, they have also successfully demonstrated their high degree of flexibility time and again,” notes Kater. “In combination with an intact global economy, an inconspicuous valuation and low interest rates, this speaks for moderate share price growth in the long term.” The bank expects the DAX to reach 20,500 points in six months and 21,800 points in twelve months.
“Environment remains positive”
According to Sören Wiedau from Weber Bank, the fact that the European stock markets are lagging behind the US is also due to concerns about possible tariffs under US President Trump, a weakening regional economy and political turmoil in France. “Despite these challenges, the investment environment for equities remains positive overall,” he explains. However, the bank is particularly optimistic about US equities. The solid economic development, supported by fiscal stimulus and deregulation, could justify the high valuations and usher in a longer growth cycle. In contrast, Weber Bank remains more cautious about European equities. “Despite more attractive valuations, tariffs and trade conflicts represent a major risk, which could weigh on both growth and the profits of export-oriented companies,” says Wiedau.
Further ECB interest rate cut firmly planned
This week, the main focus is on the US inflation figures due on Wednesday and the ECB Governing Council meeting on Thursday. “We expect the ECB to stick to its gradual approach and only make a cut of 25 basis points,” explains Cyrus de la Rubia from Hamburg Commercial Bank. He also assumes that the ECB will cut interest rates by a further 25 basis points in January and March 2025 in order to maintain the interest rate level of 2.50 percent until the end of 2025.
Important economic and business events of the week
Wednesday, 11 December
14:30. USA: Consumer prices November. In the USA, consumer prices excluding energy and food probably continued to rise a little too much in November, but less than recently, explains Commerzbank.
Thursday, 12 December
14.15. Eurozone: ECB interest rate decision. The market is largely expecting a further rate cut of 25 basis points.
Friday, 13 December
11.00 am. Eurozone: Industrial production October.
By Anna-Maria Borse, December 9, 2024, © Deutsche Börse AG
About the author
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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