The DAX recorded an impressive increase of around 22 percent in the first half of 2025, positioning it significantly ahead of other major indices such as the Euro Stoxx 50 and the S&P 500. This strong performance is primarily attributed to several factors:
Reasons for the Upsurge
- Massive government spending in Germany, particularly investments in defense and infrastructure, which buoy companies in utilities, financials, and industrial sectors.
- The hope for a prompt resolution in the transatlantic trade dispute generates optimism in the markets.
- The quest by many investors for alternatives to the US dollar further strengthens European stock markets.
Top Winners and Risks
Among the top winners in the DAX are companies like Rheinmetall with a price increase of nearly 185 percent, driven by high demand for armaments due to geopolitical crises. Other winners include Hensoldt and Renk, while some stocks like Porsche had to face significant losses.
The question of whether this stock market boom is occurring “on credit” can be answered in light of the significant government expansion of spending: There are indications that part of the boom is financed by increased government expenditure. This can lead to record investments in the short term but also carries risks regarding the sustainability of growth. Analysts also warn of potential political uncertainties in the US and growth concerns as possible risks for future developments.
Implications for Investors
For private investors in German-speaking regions, this means:
- An attractive phase with high return opportunities due to strong price gains.
- At the same time, they should closely monitor the underlying financing mechanisms – particularly government debt or expansive fiscal policy.
- The risk of a correction remains if political or economic conditions worsen.
Overall, the stock market boom in Germany demonstrates a combination of robust growth in key stocks and supportive fiscal policy. Therefore, investors should carefully weigh both opportunities and risks.