After yesterday’s electoral setback in the German Bundestag, the DAX experienced a drop of around 500 points. However, this did not disrupt the ongoing upward trend. Following Merz’s defeat in the first voting round, there was a palpable sense of confusion at the market regarding the next steps. Initially, uncertainty reigned, and many investors were left wondering how to proceed.
Yet, prior to the second voting round, a show of confidence emerged from investors in Germany’s democratic structures, which indicated that they were not giving up or fleeing the situation. The prevailing sentiment was one of resilience: although the outcome was unexpected, a solution would ultimately emerge. And indeed, a resolution was found in a relatively short time, allowing opportunistic investors—often referred to as bargain hunters—to capitalize on the situation. In retrospect, the electoral defeat provided them with an advantageous opportunity to enter the market at lower prices.
The technical landscape of the DAX suggests that the market could mount another challenge for the record high, especially as the upward trend remains intact. With the new government officially in place, there is a renewed sense of optimism. Investors are hopeful for a dynamic first 100 days under the Merz government, which may stimulate economic policies and bolster market momentum.
Meanwhile, China appears to be preparing for prolonged negotiations with the U.S. and has implemented measures to support its domestic economy. Such actions would not be taken if a resolution to the tariff dispute was anticipated to follow imminently. Investors should brace for a similar timeline in their expectations. The U.S. views China as a serious competitor capable of overtaking it as the world’s largest economy. Ultimately, the U.S. government may lean towards imposing tariffs to curb China’s rise as much as possible.”
