20,000 points. In early December 2024, for the first time in its history, the DAX surpassed this symbolic threshold, closing a banner 2024 year up around 20%. This performance was even more impressive given that indices in neighbouring countries – like the SMI in Switzerland and the CAC 40 in France – performed much worse comparatively over the same period. And nothing seemed to be able to stop the DAX. Over the first three months of 2025, it was still up (+11%), reaching more than 22,500 points on 1 April.

Then came ‘Liberation day’. Like all global markets, in less than a week – between 2 and 7 April – the DAX tumbled, losing all its 2025 gains and falling below 22,000 points once again. But Donald Trump is unpredictable, and his decision on 9 April to suspend ‘reciprocal’ taxes for 90 days brought the DAX back up over 20,000 points to 21’100 on 15 April.

If we leave out the Trump episode, the German index has been over-performing since early 2024, almost as if investors have been ignoring the automotive industry crisis and the grim environment that is plaguing Germany. Several factors explain this seemingly paradoxical situation. First, the 40 giants of the DAX are indeed German companies, but they generate most of their revenue internationally. For example, the leader in enterprise software SAP, which is the largest capitalisation on the Frankfurt exchange at a maximum of more than €310 billion in late March, generates less than one-fifth of its revenue in Germany.

So the local economy has very little effect on its performance. That explains why, while over the last year the DAX was up 16%, the M-DAX – the index that includes German mid-caps that are much more affected by the local environment – was stagnant over the same period (+0,7%). Secondly, the growth of the benchmark index of the Frankfurt exchange hides very strong disparities. "The DAX has been driven upwards the past two years by very specific sectors, such as defence, banks and insurers, whereas the German economy as a whole is rather dominated by companies operating in the construction and chemical industries," said Fares Benouari, senior portfolio manager at Union Bancaire Privée (UBP). In other words: the growth of a handful of companies such as SAP, Rheinmetall, Hensoldt, Munich Re and Allianz for the most part hide the downfalls of the automotive and chemical sectors.

"German automotive manufacturers only make up approximately 6% of the DAX, whereas the tech company SAP alone is 15% of the entire index," said Christian Schwab, head of Portfolio Management at Rothschild & Co Wealth Management Germany. "Financial services providers such as Allianz and Munich Re, which together make up 12% of the DAX, have also posted solid performances."

More recently, the DAX’s upward trend has also been stimulated by the massive recovery plan launched by the German government. "Investors seem to bet on future growth driven by the €500 billion infrastructure fund and the easing of the debt brake announced in early 2025 by the Bundestag," said Alessandro Valentino, product manager at VanEck. "These measures, which are meant to stimulate the economy, bring optimism to the markets. As a result, stock prices could continue to rise as the market expects an improved economic situation, even if the current economic environment remains fragile."

In such an environment, is now still the right time for investors to bet on the DAX or its players? Opinions are mixed. "Markets reacted to the good news and the positive growth outlooks associated with the recovery plan, but that’s essentially speculation," warned Otmane Jai, investor and client advisor at family firm MJ&Cie. "In the short term, Germany continues to face economic challenges and many uncertainties. While the outlooks are more positive than they were a few months ago, Germany still hasn’t reached the light at the end of the tunnel and it remains to be seen how long it will take for the money from the recovery plan to boost the economy.

Christian Schwab, head of Portfolio Management at Rothschild & Co Wealth Management Germany, is much more optimistic: "Even though German stocks are no longer under-valued compared to their historic levels – with a current price-earnings ratio (PER) of approximately 15.5 – they remain significantly more attractive than US stocks, whose PER is around 22. As a result, a reacceleration of the German economy, driven by budget recovery measures, could make German stocks particularly attractive."

And this time around, the smaller companies could be at an advantage, according to Romain Aumond, quantitative strategist at Natixis IM Solutions: "The DAX seems to have reached valuation levels that we can say are reasonable. However, the mid-caps segment is still ‘cheap’ compared to the expansionist budgetary policy implemented by this new coalition. The more accommodating stance of the ECB in our main scenario will also support risky German assets. We’re focused on defence, technology, banking and industrials – with the exception of automotive."