Shortly before the turn of the year, the DAX set a new record. But what is the record high really worth? It’s worth taking a closer look.
By Angela Göpfert, tagesschau.de
The leading German index marked an all-time high on Monday at 13,818.65 points. This means that the DAX price gains since the Corona crash low in March (8256 points) have been a good 67 percent. The MDAX for medium-sized stocks and the SDAX small and mid-cap stocks also reached historic highs.
Three positive news items are processed on the stock exchange at the beginning of the week and converted into price gains. Investors are relieved that US President Donald Trump signed the corona stimulus package that was passed by Congress with a bipartisan majority.
Relief over last minute deal
There is also positive news for the markets from London and Brussels: the post-Brexit agreement is in place. The EU states have already approved the preliminary application of the deal today. The German government has also given the go-ahead for the trade agreement between the European Union and Great Britain.
“Both parties maintain a close economic partnership,” emphasizes chief economist Thomas Gitzel from VP Bank. It is crucial that the agreement leaves room for future governments to intensify the trade relationship.
Vaccination start as a bringer of hope
Last but not least, the vaccination launch that took place over the weekend in Germany and many other European countries was positively received on the stock exchange. With every person vaccinated, investors hope that the end of the pandemic will come a little closer. It is this hope that is currently being traded on the stock exchange.
But that’s not all: The continued unbelievable flood of money from the central banks also creates a positive “background noise” on the markets. The total assets of the ECB and Fed have risen to historic highs in the corona crisis.
“The ECB is likely to acquire such a high value of government bonds in the coming year that all new issues by the countries of the Eurosystem will be more than covered,” emphasizes market expert Robert Rethfeld from Wellenreiter-Invest.
DAX price still well below record high
But what is the record high in the DAX really worth? In order to assess this, you have to know that the DAX is a so-called performance index. The company’s dividend payments are therefore included in its calculation. This reinvestment of dividends creates a built-in compound interest effect. Critics therefore also speak of the “tuned” DAX or “Botox-DAX”.
In fact, the price DAX, i.e. the DAX 30 without dividend payments, is still a long way from its all-time high. At the beginning of the week, the DAX rose to a peak of 5978 points – and was thus almost eight percent below its record high from the beginning of 2018 (6444 points).
Dow Jones beats DAX
It is important to look at the DAX price index, especially when it comes to comparing the performance of the DAX with other international indices. Because all major international indices such as the Japanese Nikkei, the British FTSE 100, the French CAC 40 or the US leading index Dow Jones are pure price indices.
On Wall Street, both the Dow Jones and the market-wide S&P 500 and the technology-heavy Nasdaq Composite recently set new records. American stocks are also ahead in the medium to long-term perspective. The Dow Jones rose by over 70 percent in the past five years, and the DAX price index just under twelve percent.
Starting signal for the Christmas rally?
On Monday, Wall Street should continue to improve, not least thanks to Trump’s signature under the corona aid package. The future on the Dow Jones Industrial Average is increasing by 0.6 percent at the hour.
That could possibly be the starting signal for a Christmas rally that starts a little later than usual this year. On a statistical average, the prices rise significantly on the last five trading days in the old year and the first two trading days in the new year.
Use euro strength with caution
The “safe haven” gold, however, is not in demand on Monday. In return for the rising stock markets, the gold price falls 0.7 percent to $ 1,875.
At the beginning of the week, the euro peaked at $ 1.2249 – and is thus temporarily approaching its two-year high at $ 1.2272. The common European currency is benefiting from investors’ increasing appetite for risk.
“A strong euro usually signals an emerging or stable world economy”, emphasizes market expert Rethfeld from Wellenreiter-Invest. On the other hand, an excessively strong euro could burden the German export industry.
Bitcoin targets next brand
Meanwhile, the breathtaking Bitcoin rally continues on the crypto exchanges. The price of the most famous cryptocurrency rose to over $ 27,000 at the beginning of the week. At the weekend, Bitcoin hit a record high at $ 28,382. This means that the digital currency has gained around $ 20,000 since the beginning of the year. During the first corona wave in the spring, the price had temporarily slumped to below $ 4,000.
Brexit deal boosts carmakers
After the trade agreement between the EU and Great Britain, the focus on the German stock market is particularly on the carmakers; they are clearly the beneficiaries of the last-minute Brexit deal. For example, BMW had warned in advance that an exit without a trade agreement would cost the company a three-digit million amount per year. The relief among investors is correspondingly great; Shares from BMW, Daimler and VW are among the biggest winners in the DAX in early trading.
Volkswagen said the deal between the EU and Great Britain created planning security for the group and its British brand Bentley Motors. This is particularly important for British customers.
BMW is increasing the number of electric cars
BMW wants to more than double its share of electrified vehicles in sales in the next three years – “from around eight percent this year to around 20 percent in 2023,” said CEO Oliver Zipse of the “Augsburger Allgemeine”. “We are now significantly increasing the number of electric strikes again.” In the years 2021 to 2023, BMW will also build a quarter of a million more electric cars than originally planned.
Delivery Hero at a record high
The prospect of a successful multi-billion dollar takeover in South Korea pushes Delivery Hero to a record high. The shares of the food supplier rise at the top by 11.5 percent to 132.10 euros. The company is ready to accept the requirements of the South Korean competition authority and to part with the subsidiary Yogiyo.
Deutsche Post boss as course driver
Post boss Frank Appel knows how to move courses: “We are confident of ending 2020 with a record profit,” said Appel in an interview with the “Frankfurter Allgemeine Sonntagszeitung”. That drives Deutsche Post shares up. Thanks to the e-commerce boom, the DAX company is one of the big winners of the corona crisis. In the current year, the share has gained around 20 percent.