Stock Exchange Head's Remark on Traffic Light Accident: "Done, finished, past - yet the markets persist"
In the ever-changing landscape of global politics and finance, the impact of political decisions on stock markets is a topic of great interest. This article explores the potential effects of the 2025 German federal election and the ongoing shifts in U.S. elections on the German DAX and American stock markets.
Political instability in Germany, stemming from the approaching 2025 federal election, has raised concerns about potential fragmented coalitions involving parties that might advocate for protectionist policies. These uncertainties pose risks to the DAX, particularly for companies like Siemens and Adidas, which heavily rely on global supply chains and exports.
However, Germany's current fiscal policy, with an expansionary approach and a €500 billion infrastructure fund, has fostered growth prospects. This expansionary stance, coupled with Germany’s export resilience, has helped the DAX outperform many peers, despite the political uncertainty. The new reformist coalition is implementing measures to rebuild economic growth, deregulate, and increase defense and infrastructure spending, which supports domestic demand and corporate profitability, providing a cushion against political risks.
In contrast, U.S. political instability, particularly during election periods, tends to increase market volatility and uncertainty. This instability affects sectors tied to government spending and trade policy, but its impact on the DAX is limited due to the indirect nature of the relationship between the two economies.
The dissolution of the German traffic light coalition and the hardened fronts between the Chancellor and the Minister of Finance have led to a significant negative closing for the DAX. However, the potential for capital rotation towards European equities like the DAX, which may be undervalued relative to U.S. indices, is a possibility.
The article suggests a potential focus on stocks and investments that could benefit from the new U.S. president, Donald Trump. Following the US election, the Dow Jones and S&P reached record levels due to tax cuts, less regulation, and well-positioned corporations. There is great fear that tariffs in the USA could negatively impact the German stock market, particularly due to high exports.
In a time when democracy is threatened, it is crucial for parties to come together and find compromises. The political decisions in Germany have much shorter legs than those in the USA, making it essential for parties to act swiftly and decisively to maintain market stability.
In conclusion, while political instability in Germany introduces risks to the DAX, fiscal reforms and EU deregulation efforts support underlying growth. This dual landscape means investors must balance geopolitical risks with fiscal and policy-driven growth opportunities on both sides of the Atlantic.
- The potential fragmented coalitions in the 2025 German federal election, which could advocate for protectionist policies, pose risks to companies like Siemens and Adidas that heavily rely on global supply chains and exports, as this political instability might impact the German DAX.
- The new reformist coalition in Germany is implementing measures to rebuild economic growth, deregulate, and increase defense and infrastructure spending, which supports domestic demand and corporate profitability, providing a cushion against political risks for the German DAX.
- U.S. political instability during election periods tends to increase market volatility and uncertainty, affecting sectors tied to government spending and trade policy, but its direct impact on the DAX is limited due to the indirect nature of the relationship between the two economies.
