Anyone who is a bit superstitious could blame Santa Claus: late on Tuesday afternoon, the German leading index Dax rose to a new all-time high. The most important domestic stock market barometer climbed to a peak of up to 16,550 points. “The all-time high acted like a magnet in the past few days and was finally jumped over today,” says market expert Konstantin Oldenburger from the brokerage firm CMC Markets.
Many private individuals are likely to be surprised by the new index record: economists ultimately see the country in a recession, politicians are complaining about “Germany as a location” – and inflation is not yet completely under control. However, since the beginning of November, the leading index has risen steadily by 11.64 percent, despite all the prophecies of doom. “You might think that the first Christmas presents have already been distributed,” says stock expert David Kepper from Commerzbank.
However, interest rates are responsible for the massive upward trend: investors have been speculating on the stock exchanges for weeks that the central banks will lower their key interest rates by spring at the latest. Given that inflation is easing, they no longer have to take as harsh action against rising prices as in the past few months. If bonds or account investments subsequently bring less interest, private and professional investors could again invest more in the stock exchanges. “Now investors are celebrating,” says Manfred Hübner from the analysis company Sentix.
Whether investors’ expectations are fulfilled depends primarily on inflation: If prices actually settle at the major central banks’ inflation target of two percent, the stock market traders could be right. However, if lavish wage agreements or an escalation in the Middle East drive up prices, the central bankers could have to counteract this with further interest rate increases. “Investors also stay in the market because they know that December is usually a good month for stocks,” says market expert Konstantin Oldenburger.
Every year, financial professionals actually speculate on a so-called Christmas rally. Historical evaluations of the entire DAX history since 1988 show that December is generally a good month for the stock market. Many fund managers may ultimately be tempted to improve the performance of their products at the end of the year. However, Christmas presents on the stock exchange were usually only distributed in the second half of the month – and not in time for St. Nicholas.