FRANKFURT (dpa-AFX) – After a less rewarding first half of the year, the second half has kicked off with a DAX bang. “For Germany’s national team, the tournament may already be over, but in stocks the second half has only just begun,” Helaba said in its weekly outlook. Most recently, Germany’s benchmark index has shown relative strength, while tech stocks tied to the mega theme of artificial intelligence (AI) have stumbled.
Other national markets, Helaba said, “were long out in front”, but the DAX needed almost six months to break its record from January. Global bellwether indices such as the EuroStoxx and those in the US had a big head start: in the meantime they repeatedly hit new highs, in part because of their heavier technology weight.
In the Dow Jones Industrial Average, Apple, Amazon, Microsoft, Alphabet and Nvidia now include the world’s five largest tech giants. Germany’s benchmark index can point to just two classic technology stocks, SAP and Infineon, with heavyweight SAP coming from the software sector, where earlier euphoria has given way to fear that AI could become a threat.
The experts at Index-Radar said on Friday they were surprised by how quickly the DAX was able to clear its old record. “The momentum comes at a price,” they cautioned, pointing to the 21-day average line, from which the benchmark has now pulled away significantly. “A move back below the old record at 25,500 points would therefore not be a surprise, but a healthy interim step,” they said, sounding anything but optimistic. They see the DAX more in a “grinding sideways phase”. DZ Bank, however, stuck on Friday to its year-end target of 27,500 points, which still implies almost seven percent upside.
According to Index-Radar, the DAX has benefited in recent days from a partial reallocation by international investors who had been underweight Germany in particular. One argument has been the federal government’s reform package, which carries a certain signaling value but does not promise near-term growth impulses. “Whether this actually becomes more than a flash in the pan now depends entirely on implementation.”
So it is questionable whether demand for blue chips will be sustainable. The backdrop is that worries about another near-term tightening of monetary policy have faded somewhat after the latest US jobs report, and talks about an end to the war in Iran are continuing. If there are no disruptive factors on that front, the key in the new week could be what happens after the long weekend in the US.
Concerns about a tech bubble, in any case, are not yet warranted at present, Helaba said. “In our view, the most important sign of overheating, namely an extremely high valuation, is not currently an issue in the technology sector,” expert Markus Reinwand wrote. Profit growth is not easy to extrapolate everywhere, and it would also be unusual if a technological revolution did not lead to overinvestment.
Reinwand is more concerned about high valuations across the board, including in blue chips that the DAX reflects more strongly. Here, the expert said, sharply rising corporate earnings are necessary, but that is not a given. Over the medium term, however, he believes AI benefits will also reach other sectors of the economy. According to Pimco economist Tiffany Wilding, AI could be deflationary in the long run if it boosts productivity, expands supply and lowers unit labor costs.
As for economic signals, the new week has few highlights to offer. New impulses “ahead of the summer doldrums”, as Commerzbank put it, could come in the US on Monday from the ISM index for the services sector. On the corporate side, the agenda is shaped more by annual general meetings, before the earnings season is kicked off in mid-July by US banks./tih/ag/he