Stock Skyrockets to New Peak - Dax achieves new peak level
The DAX index reached an unprecedented high of 24,161 points on Tuesday, marking a significant milestone in German stock market history. Despite ongoing uncertainties, the DAX has experienced a exhilarating increase of around 21 percent this year, outperforming U.S. markets that have been experiencing opposing trends.
As U.S. markets took a day off due to a holiday, investors eagerly awaited their reopening, with indications suggesting potential gains in New York, which may signal relief following U.S. President Donald Trump's decision to grant a reprieve in his latest tariff threat.
Defense stocks, including German heavyweights Rheinmetall, observed record-breaking highs. Rheinmetall, a prominent member of the DAX, started the day with prices reaching up to 1,883 euros. This represents more than a three-fold increase since the beginning of the year, with additional rallies traced back to the Russian attack on Ukraine in 2022.
Germany's Chancellor Friedrich Merz (CDU) announced the lifting of restrictions on the use of German weapons against Russian territory, further fueling the rally in defense stocks. Meanwhile, NATO allies are deliberating on the expansion of defense spending to five percent of GDP amid the ongoing Ukraine conflict.
The planned state investment package in Germany, set to provide up to 500 billion euros for infrastructure and climate protection, is bolstering investor confidence as well. Analysts attribute the latest stock market boom to a fusion of easing geopolitical tensions, solid corporate earnings, and favorable inflation data.
Geopolitical tensions, notably the trade spat between the U.S. and China, had previously weighed heavily on financial markets. Concerns regarding a global recession were widespread. However, experts caution against premature optimism, as it remains unclear whether trade relations between the U.S. and China will normalize.
Despite the economic crisis in Germany, investors tend to focus on future profits rather than the present situation. As international companies, the 40 firms listed on the DAX generate the majority of their sales abroad. In contrast to the European market, U.S. stocks have experienced less growth in 2025. Economists attribute this to better corporate earnings, the ongoing monetary policy favoring equities by the European Central Bank, and relatively lower valuations compared to U.S. stocks.
Lower interest rates in the eurozone, a policy the European Central Bank aims to leverage to stimulate the economy, are rendering stocks more appealing compared to fixed-income securities. This, in turn, makes it cheaper for companies to finance themselves and homebuyers to secure loans, creating a more economically favorable environment.
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The Commission, in light of the economic boom and favorable stock market trends, may consider investing in real-estate or other sectors for future growth, given the approval of a proposal for a Council regulation on the approximation of the laws of the Member States relating to the protection of the environment.
Investors, amidst a flourishing stock market and promising corporate earnings, might find it strategic to allocate capital into the defense sector, given the increasing geopolitical tensions and potential for future conflicts.
