Can Germany’s stock market really keep rising for an eighth straight year? Handelsblatt’s traditional end-of-year survey suggests the answer is a clear yes.
Analysts polled by Handelsblatt expect another year of healthy stock market gains in 2016, fuelled by low bond yields and a weak euro that should beat back any geopolitical risks and and fragile emerging markets.
Market experts at 35 German and foreign banks on average predicted a 10 percent rise in the blue-chip DAX stock market index to 11,793 points in what would be the eighth straight year of recovery since the 2008 financial crisis. If that prediction comes true, the DAX index of Germany’s 30 biggest companies will have risen 228 percent since the upturn began in 2009.
While the analysts’ forecasts proved accurate for 2015, many conceded that it’s getting harder to make predictions because U.S. and European interest rates are diverging in the wake of the Federal Reserve’s quarter-point hike on December 16.
Markets are entering new territory, because there’s never been such a divergence over a prolonged period. The rate differentials are set to widen next year with further Fed rate hikes and not the remotest sign that the European Central Bank will depart from its ultra-easy monetary policy.
Despite the ECB’s policies, economists expect a rise in the yield on 10-year German government bonds, or Bunds, to 0.94 percent, a massive 54 percent rise over its current level, but still a low level.
Historically low interest rates combined with the weak euro, which they forecast on average to fall 3.6 percent to $1.06 from the current rate of around $1.10, will help keep stocks attractive, the analysts said.