DAX rises to record high – 18,000 point mark broken

As of: March 13, 2024 9:29 a.m

For the first time in its history, the DAX broke the 18,000 point mark. But what are the reasons for this brilliant price rally? And can prices continue to rise now?

The DAX made stock market history today: Shortly after the start of trading on XETRA, the leading German index surpassed the 18,000 point mark for the first time. In the first few minutes of trading it continued to rise to a record high of 18,001.42 points. This means that the DAX only needed three months to break the next thousand mark. As a reminder: On December 13, 2023, the German leading index peaked above the 17,000 point mark for the first time.

Interest rate hopes as a price driver

But what is behind this rapid price rally? The main reasons for the record hunt on the stock market have been the same for months: investors are speculating on a change in monetary policy and imminent interest rate cuts – both in the USA and in the euro area. Falling interest rates make investments in stocks more attractive.

The majority of market participants are currently expecting the European Central Bank (ECB) to cut interest rates for the first time in June. Investors expect that the US Federal Reserve Bank will then also flip the switch.

Best time on the stock market

Particularly noteworthy: Although the expected timing of the interest rate turnaround has been pushed further and further back in recent months, this has not caused investors to exit the market. On the contrary: they quickly came to terms with the prospect of higher interest rates for longer. The only thing that counts now is apparently the prospect that interest rates will fall – whether a few weeks or months earlier or later no longer plays a major role in this reading.

In the search for explanations for the record hunt on the German stock market, seasonality should not be ignored. After all, the period from the beginning of November to the end of April is, on average, the best six months on the stock market: During this period, the chance of price gains is significantly increased.

Every reset is purchased

But there are definitely good reasons to distrust the record rally in the DAX. Especially with a view to the USA, a turnaround in interest rates in June is by no means a given. According to the CME Group’s Fed Watch Tool, the probability of this is currently just 57 percent.

Market observers had also recently repeatedly referred to the “overbought” market situation after the long DAX rise and the “hot” prices – and warned of a possible setback. Only investors didn’t want to hear such warnings. Ultimately, every setback in the DAX, no matter how small, was used to gain entry.

FOMO in the stock market

But this also shows that an important reason for the record high in the DAX is investors’ fear of missing out. The term FOMO was coined in English for this: Fear Of Missing Out. And this is also a very strong driving factor for human action on the stock market.

Investors who have recently been waiting on the sidelines fear missing out on the best part of the rally. So they brush aside their concerns and get in – and in doing so only drive up the prices even further. But this only puts the remaining, still hesitant investors under even greater pressure.

DAX sends buy signal

The upward trend in the DAX is still intact. In addition, with its record high, the DAX is entering new chart territory – or “uncharted territory”, as experts say. Because above an all-time high there is naturally no resistance, i.e. price levels at which the sellers gained the upper hand in the past and the DAX turned downwards.

Such a record high is therefore considered one of the best buy signals that technical analysis has to offer. From this perspective, too, the DAX now has a good chance of further price gains.

Volker Hirth, HR, tagesschau, March 13, 2024 10:12 a.m

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