• DAX with strong performance since the beginning of the year
• Expert sees a further upward trend for the German stock market
• Focus on small caps
Twelve percent price loss and a slide below the 14,000 point mark: 2022 was a year to forget for investors on the German stock market. The domestic stock market will be completely different in 2023: the leading German index DAX has not only tackled the 16,000 point mark again, it has even set a new record high at 16,331.94.
DAX with catch-up potential
This development comes as no surprise to MainFirst Asset Management’s Alexander Dominicus. The manager of the independent European multi-investment boutique sees the weak development of the previous year as one of the main reasons for the upswing in 2023. The fact that investors apparently assessed the economic situation as more dramatic than it ultimately presented also contributes to the more positive mood on the stock markets: ” The economy is reasonably robust and energy prices have also fallen significantly again. Overall, the reporting season went well, so that German equities are rightly among the winners this year,” says Dominicus, who works as a fund manager in the Blend/European Equities team at MainFirst Asset Management, in a recent brief analysis cited in Institutional Money.
Expert with optimism for rest of the year
Dominicus apparently does not believe that the end of the road on the German stock market has already been reached. According to the expert, German companies would paint a predominantly positive picture of developments in 2023. The “uncertainty on the capital markets remains […] high, especially when it comes to the topics of inflation, interest rates and economic development”, but he still considers German stocks to be “relatively cheaply valued” – especially in direct comparison with their US counterparts.
Catch-up potential for second-line stocks
While the stock exchanges have been supported in particular by the strong price development in the tech sector in the course of the year to date and car and industrial stocks have also contributed to the strong DAX performance, real estate securities in particular have suffered from the high interest rates. In the further course of the year, the expert sees entry opportunities for investors, especially in smaller stocks: “The great catch-up potential lies in small-caps. The valuation difference between large and small-cap companies is historically high. This offers stock pickers attractive opportunities,” Dominicus is quoted as saying by Institutional Money.
The monetary policy meanwhile, the fund manager warns that the stock markets, especially those of the US Federal Reserve, could be slowed down. Nevertheless, he sees more leeway for monetary authorities to mitigate an economic slowdown if inflation continues to fall.
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