The German stock market is experiencing a good moment: the fall in oil prices and a widespread rebound –spanning from the software sector to chemicals and consumer goods– are driving the country’s stocks.
After underperforming compared to most European benchmark indices in 2026, the DAX has risen by +6% this quarter, reaching an all-time high. The decline in oil prices has been the main driver, benefiting companies with a high energy intensity, which account for nearly one-third of the index. The unease surrounding the artificial intelligence sector has turned out to be a boost for software companies, like SAP, which makes up approximately 12% of the DAX weighting.
"The DAX has benefited from its cyclical sector composition, especially from its high exposure to the technology sector, where the combination of software and hardware has offered some protection," noted Carolin Raab, strategist at Deutsche Bank. "The relatively low exposure to traditional energy and basic resources has also helped."
The rebound is spreading rapidly: nearly 80% of DAX components are trading above their 200-day moving average, and 18% have reached new 52-week highs just this week. Among the main European indices, only the Swiss SMI shows greater momentum. In the fund manager survey conducted last month by Bank of America, Germany ranked as the second preferred market in Europe, with a net 16% of investors planning to increase their exposure to German stocks over the next year.
Bloomberg Intelligence strategists, led by Laurent Douillet, indicated that historically local conditions have had little influence on the DAX, given that its companies generate only 15% of their sales within the country. However, this dynamic seems to be changing: the purchasing managers' indices (PMI) of the United States and Germany are gaining greater relevance, to the detriment of the indicated smaller ones. Strategists forecast a +16% growth in earnings per share over the next 12 months –compared to the +13.4% estimated by consensus– driven by capital spending on artificial intelligence, increased defence spending, the financial sector, and the recovery of the German economy.
The fiscal stimulus from Germany has begun to take effect, and economists at UBS Group expect it to contribute around 60 basis points to economic growth in both 2026 and 2027. However, a basket of stocks selected by UBS –linked to the German fiscal cat– is trading at a 20% discount to the Stoxx 600 index, the largest difference recorded in over two years.
"The German fiscal package is no longer a mere promise; orders are starting to come in," stated UBS strategists Gerry Fowler and Sutanya Chedda. "Money is being spent and the necessary laws have already been passed to accelerate the process."
"Fiscal spending should provide a structural boost, although patience is required, as the execution is gradual and, for now, it is the defence sector that is carrying the greatest weight," said Barclays strategists.