German stocks outperformed European stocks. that’s why

German stocks have significantly outperformed European stocks this year and have moved in tandem with U.S. stocks. The main market DAX 30 is up about 19% so far this year, while the European benchmark Stoxx 600 is up 5%. Germany’s gains are closer to those in the United States, where the S&P is up about 23% so far this year. Analysts told CNBC that there are several reasons underpinning these gains, including low expectations at the start of the year, exposure to the U.S. economy and the upcoming election. Sabrina Reeh, senior portfolio manager at DWS, told CNBC on Wednesday that valuations were relatively low at the beginning of the year and sentiment on the German stock market was “subdued,” but earnings developments ended up being “better than expected.” One stock in particular has boosted the German market: SAP, whose shares are up nearly 59% this year. Maximilian Uleer, Deutsche Bank’s head of European equities and cross-asset strategy, told CNBC the firm has contributed 8% to the German market’s year-to-date performance. In late October, SAP’s shares hit an all-time high after the company raised its full-year targets and posted strong results for its cloud business. At the time, CEO Christian Klein said SAP was “confident” in improving its outlook, adding, “We are making tremendous progress in commercial artificial intelligence.” The stock has been rising since the results were announced. The success of the German stock market this year is also related to its investment in the United States. “German DAX companies generate a higher proportion of revenue in the U.S. than in Germany. Despite concerns about potential tariffs, a large portion of that revenue is generated locally and is likely to be unaffected by tariffs,” Deutsche Bank’s Uleer said. Early election: Positive surprises While the fall of the German government in November was largely a surprise, analysts acknowledge that the development could be positive for stocks. “From a market perspective, snap elections are seen in particular as an opportunity for more structural reforms and increased spending, whether through a shift in government spending priorities or through a higher fiscal deficit,” Url said. Important because manufacturing, traditionally an important part of the German economy, has been hit hard throughout 2024. DWS’s Reeh mentioned how an early election could help improve the overall sentiment in the German market. “We don’t know the actual political agenda,” she said, noting that it was unclear how many parties would form the incoming government, but lowering regulations and easing the debt brake could help improve sentiment. Germany is currently in talks to loosen its famous debt brake, which imposes strict debt targets. It’s unclear how much more Berlin is willing to spend, but the overall trajectory points to more stimulus. Trump’s Tariffs Despite Germany’s strong performance in 2024 and the possibility of new post-election stimulus, analysts remain concerned about the impact of potential U.S. tariffs on Berlin. President-elect Trump has threatened to take such measures on the European economy, which could cause further pain for the German auto industry. Asked whether the German market’s outperformance would continue in the new year, Wray said Trump’s announcement was a “key item to watch.”

Berlin cityscape, Alexanderplatz, TV tower

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German stocks have significantly outperformed European stocks this year and have moved in tandem with U.S. stocks.

main market, German DAX 30 IndexIt is up about 19% so far this year, compared with a 5% gain for the European benchmark. Stoke 600. German gains are closer to domestic performance in the U.S., where Standard & Poor’s It’s up about 23% year to date.

Analysts told CNBC that there are several reasons underpinning these gains, including low expectations at the start of the year, exposure to the U.S. economy and the upcoming election.

Sabrina Reeh, senior portfolio manager at DWS, told CNBC on Wednesday that valuations were relatively low at the beginning of the year and sentiment on the German stock market was “subdued,” but earnings developments ended up being “better than expected.”

One stock in particular has been driving the German market: sapIts shares have risen nearly 59% this year. Maximilian Uleer, Deutsche Bank’s head of European equities and cross-asset strategy, told CNBC the firm has contributed 8% to the German market’s year-to-date performance.

In late October, SAP’s shares hit an all-time high after the company raised its full-year targets and posted strong results for its cloud business. At the time, CEO Christian Klein said SAP was “confident” in improving its outlook, adding, “We are making tremendous progress in artificial intelligence for business.”

The stock has been rising since the results were announced.

The success of the German stock market this year is also related to its investment in the United States.

“German DAX companies generate a higher proportion of revenue in the U.S. than in Germany. Despite concerns about potential tariffs, a large portion of that revenue is generated locally and is likely to be unaffected by tariffs,” Deutsche Bank’s Uleer said.

Early elections: a positive surprise

Although The fall of the German government in November was largely a surprise, but analysts acknowledged the development could be positive for stocks.

“From a market perspective, snap elections are seen as an opportunity for more structural reforms and increased spending, whether through a shift in government spending priorities or through a higher fiscal deficit,” Url said.

This is especially important because manufacturing, which has traditionally been an important part of the German economy, was hit hard in 2024.

DWS’s Reeh mentioned how an early election could help improve the overall sentiment in the German market.

“We don’t know the actual political agenda,” she said, noting that it was unclear how many parties would form the incoming government, but lowering regulations and easing the debt brake could help improve sentiment.

German Chancellor Olaf Schulz attends a meeting of the Bundestag on November 13, 2024.

Germany’s ‘debt brake’ rules brought down its government – and that may be about to change

Germany is currently in talks to loosen its famous debt brake, which imposes strict debt targets. So far, it’s unclear how much more Berlin is willing to spend, but the overall trajectory points to more stimulus.

Trump’s tariffs

Although Germany performs well in 2024 and may introduce new stimulus measures after the election, analysts are still concerned about the impact of possible U.S. tariffs on Berlin.