"The DAX is valued with plenty of air"

There is a strong upward trend on the stock market. The DAX reaches a record high. Two stock market experts explain in an interview what investors should look out for now.

ntv.de: The stock markets are on a final spurt at the end of the year. And all this just because interest rate cuts by the Fed and the ECB have become more likely?

Daniel Saurenz: Fed Chairman Jerome Powell presented the Christmas presents early when he hinted at three interest rate cuts for next year. Falling interest rates, stable corporate earnings and a stable labor market in the US - that is the feel-good scenario on the stock market at the moment and the scenario priced in for 2024.

In Germany, the situation looks more unpleasant. The Bundesbank and economic research institutes are expecting a recession. Despite this, the DAX is climbing to the highest level in its history. Is the stock market ignoring this?

Benjamin Feingold: Expectations are traded on the stock market. And investors expect interest rates to fall next year - not only in the USA, but also in Europe. That will help the German economy.

Saurenz: Another important factor for the market is why interest rates are being lowered. If the central banks are doing this from a position of strength because they have got inflation under control, that's good. If interest rates are lowered because a cooling economy needs to be stimulated, this is bad for the stock market.

In the USA, key interest rates are at their highest level for more than 20 years. Even after interest rate cuts, they will remain high. And yet the stock market is having a party?

Feingold: Many had expected the US economy to have problems this year due to the rapid rise in interest rates. But at the moment it looks as if inflation is falling without a recession. The labor market is stable. The stock market is in a good mood at the moment. But the mood on the stock market can change quickly.

How much hope is there in the share prices of DAX companies?

Saurenz: Overall, the DAX is valued with plenty of air. SAP alone has contributed 500 points to the record this year. Rheinmetall and Adidas have also done very well. However, the classic cyclical shares are still in the cellar, for example BASF or Lanxess. These shares are a good illustration of the concerns about the German economy, for example in view of energy prices. For other shares, however, a rosy scenario is already priced in.

Feingold: The companies have to deliver. The same applies to the DAX as to US technology stocks, for example. As things stand, the valuation is ok, but there must be no disappointment with the expected profits.

Given the rally that has been underway since the fall, is it still worth getting in?

Feingold: You can't say that across the board. One example is the Nasdaq 100, where the "Magnificent Seven", i.e. Apple, Nvidia, Alphabet, Meta, Amazon, Tesla and Microsoft, are valued quite sportily. They account for 40 percent of the valuation of the Nasdaq 100. There are 93 other companies in the index. It is possible that there will be a change of favorites next year and that other stocks will perform much better than the "Magnificent Seven".

Saurenz: The example of the subway or the streetcar that you shouldn't run after because the next one is coming soon may be hackneyed, but it still applies to the stock market. In October, the mood on the stock market was very poor and prices were low. Now the mood is very good and prices have risen sharply. There will also be times in the future when hardly anyone wants shares and prices will fall. These are good buying opportunities. This Christmas, however, the buying opportunities are not particularly exciting from a risk/reward perspective.

Benjamin Feingold and Daniel Saurenz run the stock market portal "Feingold Research". Jan Gänger spoke to them.