Here we print the original commentary by Otmar Lang, chief economist of the TARGOBANK, for the coming year. 10 percent increase in the Dax is possible. Quote:
The recent easing of tension in the trade dispute between the USA and China and the reasonably clear brexit fronts following the British general election have brightened economic expectations. Against this backdrop, the DAX was able to record what at first glance appears to be an outstanding performance this year. Growth of more than 20 percent is on the books. However, the picture is deceptive, as ultimately only the losses from the previous year were made up. Looking at the DAX performance of the last two years, it is more or less zero percent.
For 2020, there is therefore a risk that the positive expectations may already be priced in within 2019.
So what is the story for 2020 or at least for the first half year of the new decade?
Although growth in the Euro area as a whole will pick up in 2020, but it will ultimately remain weak. Inflationary pressures will hardly increase. In this environment, the ECB will not move in terms of interest rate policy in 2020 and will not raise interest rates in 2021. The US stock market may also not provide any tailwind. In presidential election years the US equity markets were often undecided until the election in November. One special feature, however, is the impeachment procedure that has now been initiated. It remains to be seen whether this will have a negative impact, possibly only in the short term.
And yet we remain optimistic. The economic risks are rather positive. This is partly due to the very moderate forecasts. On the other hand, the DAX has in the past accurately predicted German investment activity. If this were to be true again at the current edge, the economy would clearly exceed the moderate expectations. Growth could therefore pick up more strongly than previously forecasted. In this scenario, investors would sell bonds and move increasingly into equities as the economic outlook brightened. A gain of more than 10 percent in the DAX would then be possible.