All Aboard the Roller Coaster

Frankfurt stock exchange marc-steffen unger
Investors are excited after the recent DAX rally.
  • Why it matters

    Why it matters

    Predictions vary, but euphoria is unwarranted until the DAX index shows it can stay above the 10,000-point threshold over the long term, and ultimately, it is only rising profits that can justify higher stock prices.

  • Facts


    • The U.S. Federal Reserve ended its bond-buying program this fall. Investors now hope the European Central Bank will begin a similar stimulus.
    • One strategist expects the DAX to hit 11,500 by the end of 2015. Another sees it no higher that 9,500.
    • The euro was valued near $1.40 recently, but has fallen to $1.24, making European industries more competitive.
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In many countries in Europe, people celebrate St. Nicholas’ Day on December 6 by exchanging pre-Christmas goodies and presents.

The gifts came in early for investors when the DAX stock index of 30 major German companies broke the 10,000-point barrier on Tuesday – and there is reason to believe the traditional end-of-year rally is for real.

In June, the leading index climbed above the magic five-digit mark and reached a record high of 10,051. But the euphoria didn’t last long, and fears of weaker global growth pushed the index back below 8,400 by mid-October.

Now that downward plunge has stopped, and most investment experts think it could reach another new record high soon. But they are still cautious about next year.

“The trend is upwards for the DAX, but that includes a roller-coaster ride,” warned Ralf Zimmermann of Bankhaus Lampe, the private German bank. “Global central bankers remain the true masters of the stock market.”

With the U.S. Federal Reserve’s decision to end its trillion-dollar bond-buying program, many investors are now betting on the European Central Bank (ECB). They want it to pump money into the economy with its own bond-buying stimulus. And low interest rates are forcing investors to buy more stocks these days, due to a lack of alternatives.

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