Weekly outlook: "A thousand for the DAX every month"

New all-time highs across Europe

Driven by hopes of an imminent end to the war in Ukraine and the prospect of billions in reconstruction infrastructure investments, the DAX reached its highest weekly closing price in its history on Friday at 22,513 points. The all-time high reached the day before is now around 22,625 points. At the start of the new week, the leading German index is holding its ground at this higher level.

The Euro Stoxx 50 also set new records, climbing above the 5,300-point mark for the first time since 2000 and ending the week at 5,793 points. The Stoxx Europe 600 also continued its record run and added to the all-time high reached the previous week. After a gain of 9.4 percent since the beginning of the year, the broad-based European share index now stands at 552 points.

Higher valuation as a risk factor

In the midst of the current euphoria, however, Helaba warns that the risks have not diminished in the past trading week, but have actually increased. They point to US President Donald Trump's tariff policy, the renewed rise in inflationary pressure and the increasing geopolitical uncertainties, at least from a European perspective, with the start of peace negotiations in Ukraine. At least a breather on the stock markets is therefore appropriate, also because the DAX is now slightly overvalued in relation to its own history. “The upper edge of the fair valuation range is currently around 21,600 points”.

Other analysts also point out the valuation problems of the major German shares. “At 1.8, the price-to-book ratio has now reached a level where a DAX uptrend used to regularly lose momentum,” complains Commerzbank. LBBW looks at the 12-month forward P/E ratio, which at 14 is significantly lower for the DAX than for the S&P 500 (22), but is still an above-average figure. “Since its launch in 1988, the median 12-month forward P/E ratio of the DAX has only been 12.9”. The “LBBW Five-Year Model”, which has been very accurate in the past, therefore only forecasts a DAX performance of 4.3% p.a. for the next five years, which would be less than half the historical DAX performance.

Focus on quarterly figures and annual general meetings

According to LBBW, the focus of the current reporting season will clearly be on Europe in the coming days. “So far, 58 percent of Stoxx 600 companies have beaten earnings expectations and earnings growth of plus 2 percent is four percentage points above the expected minus 2 percent.” Companies reporting this week include Airbus, Air Liquide, Anglo American, BAE Systems, BHP, Leonardo, Mercedes-Benz, MTU, Sartorius, Schneider Electric and Rio Tinto. In addition, the shareholder meetings of Infineon, Siemens Energy and Siemens Healthineers are scheduled in Germany. LBBW sees the dividend season as a “positive factor for the German stock market, as analysts are currently forecasting rising dividends for 20 of the 40 DAX companies”. Overall, however, the DAX dividend total is likely to fall by four percent to EUR 50.4 billion due to significant cuts in the automotive sector.

Voting takes place on Sunday

At the end of the new week, investors will focus on the German parliamentary elections (Sunday). One reason for the recent outperformance of German equities is likely to be the hope that a new government led by the CDU could bring lower corporate taxes, falling energy prices, a more flexible labor market and less bureaucracy. However, the question arises as to what compromises will have to be made in an expected coalition government.

Important economic events of the week

Monday, 17 February 

USA: President´s Day. The US stock markets remain closed.

Tuesday, 18 February 

11.00 a.m. Germany: ZEW Index. According to the Sentix survey, the ZEW expectations for Germany should have improved in February in the opinion of DekaBank. However, one cannot be too sure in these times, as current developments regarding tariffs or the German parliamentary election campaign could lead to a reassessment.

Wednesday, 19 February 

8.00 p.m. USA: FOMC meeting minutes (January).

Thursday, 20 February 

2.30 p.m. USA: Philadelphia-Fed-Index. Helaba's strategists expect the index to fall significantly from 44.3 to just 20.0 points. The experts are therefore even more skeptical than the consensus estimate of 25.4 points.

Friday, 21 February 

09.30 a.m. Germany: Purchasing Managers' Indices.

10.00 a.m. Eurozone: Purchasing Managers' Indices. Commerzbank expects the most important economic data this week to remain at a low level for both Germany (44.5 after 45.0 points) and the eurozone (46.5 after 46.6 points). The strategists therefore expect only slight economic growth in the eurozone in the first quarter, before growth is likely to pick up over the course of the year thanks to the ECB's steadily falling key interest rates.

Sunday, 23 February 

Germany: Bundestag election: According to the chief strategists at the private bank Merck Finck, the outcome of the election on Sunday will determine the chances of a decisive, more business-friendly policy. Although real growth-promoting decisions are not expected until the second half of the year after the election, positive sentiment and thus recovery effects could already occur before then.

By Thomas Koch, 17 February, 2025, © Deutsche Börse AG