2024-09-20 09:48:24
For the first time, the DAX breaks through a historic mark, driven by monetary policy. Falling key interest rates are giving the German stock market a lasting boost.
Falling key interest rates have pushed the DAX above the historic mark of 19,000 points for the first time. The German leading index rose by 1.6 percent today and is currently trading just above the new record.
The DAX had already exceeded the 18,000 point mark in mid-March. The reason for the rally: For the first time since the outbreak of the corona pandemic, the key interest rate in the USA was cut by 0.5 percentage points, thus initiating the interest rate turnaround. Experts expect the Fed to take another interest rate step in December. Last week, the European Central Bank (ECB) also cut interest rates by 0.25 percentage points.
The prospect of falling interest rates is good news for equity investors. Stocks are becoming more attractive again compared to fixed-interest securities. Loans are becoming cheaper, companies can therefore finance themselves more easily and investments are becoming more affordable.
And the signs point to further monetary policy easing by the central banks and thus to improved financing conditions. The inflation rate in Germany has recently fallen below the two percent mark. According to an initial estimate by the Federal Statistical Office, the inflation rate in August was 1.9 percent. In July it rose to 2.3 percent, after 2.2 percent in June.
The German inflation rate, calculated according to uniform European standards, fell to 2.0 percent in August. The ECB’s inflation target for the eurozone is two percent. The markets are speculating on the next interest rate cut in September.
The development on the stock markets is in contrast to the weak economic situation in Germany. However, stock investors often look at future profits rather than the current situation. In addition, many of the 40 companies listed in the DAX operate internationally: Germany is therefore just one of many markets.
The Dax broke through the 15,000 and 16,000 point marks in March and August 2021 as global stock markets recovered from their corona lows. At the beginning of the pandemic, the index had fallen to 8,255 points. Since then, the price has recovered significantly, despite ongoing economic pressures from the Russian war in Ukraine and the Middle East conflict.