Stocks in the DAX index and Germany are now determined by the election outcomes
New Bundestag Election Result: DAX and German Stocks Show Initial Positive Response
Germany concluded its Bundestag election on Sunday with an eighty-three percent turnout, the highest since reunification. Preliminary results indicate the following party standings:
- Christian Democratic Union/Christian Social Union (CDU/CSU): 28.6%
- Social Democratic Party (SPD): 16.4%
- Alternative for Germany (AfD): 20.8%
- Greens: 11.6%
- The Left: 8.77%
The election outcome suggests the formation of a grand coalition between the CDU/CSU and SPD, which is seen as more favorable compared to the feared three-party alliance. The financial markets, particularly the DAX and other German stock indices, have reacted positively to this scenario.
Reactions of DAX, MDAX, and SDAX Indices
Reflecting investor optimism, the DAX, representing Germany's blue-chip stocks, increased by 0.95% to approximately 22,500 points early on Monday. Moreover, mid-cap and small-cap indices — MDAX and SDAX — also rose by 1.5% each, signaling investors' hope for Fresh impetus from a new economic policy.
Investors' Expectations and Policy Implications
A stable government unfolds a less burdensome landscape for the next chancellor, Friedrich Merz, while offering limited fiscal room for maneuver due to the absence of a two-thirds majority. Investors anticipate clear economic policies promoting growth and stability from the incoming government.
Industries directly affected by government policies, such as renewable energy or infrastructure development, could benefit from a coalition government. Despite short-term market volatility due to political uncertainty, stabilization is expected once the government's economic agenda is clarified.
In light of the 2021 election results, investors pay heed to the new government's focus on climate action, digitalization, and economic recovery in the wake of the pandemic. The establishment of a stable government remains crucial to maintaining market confidence.
Looking towards the 2025 election, investors remain vigilant for political stability, clear economic policies, and sector-specific opportunities. The recently formed government under Friedrich Merz presents some uncertainty, but once a stable government is constituted, investors will reassess their expectations based on the new government's policies and economic outlook.
- The positive initial response from the DAX and other German stock indices, such as MDAX and SDAX, stemmed from the prospect of a grand coalition between the CDU/CSU and SPD, which is seen as more favorable, given the financial markets' expectations for clear economic policies promoting growth and stability.
- The 2021 Bundestag election result, with a focus on climate action, digitalization, and economic recovery in the wake of the pandemic, indicates that sectors like renewable energy or infrastructure development could benefit, potentially creating sector-specific opportunities for investors.
