Driven by the prospect of key interest rates possibly falling again soon, the Dax broke its four-month-old record on Tuesday. The leading index climbed by 0.88 percent to 16,548.69 points, surpassing the record from the end of July, which was almost 16,529 points. The year-end rally continues.
In November alone, the DAX gained 9.5 percent in value. Starting from the interim low in October, which at 14,630 points was close to the annual low in March, it has now increased by around 13 percent.
The most important buying argument in recent weeks has been the hope that the European Central Bank and the US Federal Reserve have finished raising interest rates and will begin cutting them next year. Investors are expecting a tailwind for the economy from falling interest rates, as inflationary pressure has recently eased noticeably. Since excessive inflation is harmful to the economy, the central bank had to counteract this by raising key interest rates.
The markets are now pricing in interest rate cuts in the spring. Just before the weekend, a speech by US Federal Reserve Chairman Jerome Powell gave further fuel to investors' interest rate expectations. Although he had reiterated his willingness to raise interest rates further if necessary, he also said that monetary policy was already quite restrictive.
“Everything is just falling into place for stocks at the moment, and the Fed chief didn’t sound strict enough on Friday to really put a stop to the current euphoria,” explained analyst Jochen Stanzl from broker CMC Markets.
Against this background, US labor market data on Friday will be important. The development of the labor market plays a major role in the Fed's monetary policy as an indicator of the strength of the economy, but also of inflationary pressure.
Capital market expert Sebastian Dörr said about the year-end rally: "It puts the icing on the cake for good stock market years, but at least it gives bad ones a good end." The former will probably be the case in 2023: So far this year, the Dax has gained almost 19 percent, slightly more than the European EuroStoxx index. In a global comparison, it clearly overshadows the US leading index Dow Jones, but not the Nasdaq tech exchange.