When it comes to German investors who are only superficially interested in the stock market, they are likely to focus mainly on the DAX. Understandably so, as the development of the stock market barometer is mentioned in every market report. The German leading index represents the 40 largest listed companies (until a few years ago it was 30) in the country.

However, the largest companies are not necessarily the best… In fact, small caps have shown much better long-term performance. In the meantime, the „little guys“ have been lagging behind for more than two years.

In the long run, small caps clearly have the upper hand. Let’s go back about two years. Until the end of 2021, the DAX had no chance against its „little brother“ MDAX. From the beginning of 2012 to the end of 2021, the DAX recorded an overall gain of 169%. This corresponds to an average return of 10.4% per year.

In these ten years, the MDAX improved by a whopping 295%. This gave the mid-cap index an average annual return of 14.7%. The development of the SDAX was similarly good. The small cap index improved by 271% (14.0% per year).

In the long run, stocks from the second and third tier beat the standard values by a long shot. Why is this the case? The MDAX is home to numerous top-class companies that are often even world market leaders in their niches. Their advantage: Due to their smaller size, they can operate much more flexibly than the „big ships“ in the DAX.

Since 2022, small caps have been lagging behind. Since the beginning of 2022, when the Ukraine war began, the development has completely reversed. Some small caps experienced a veritable „buyer’s strike“. The lackluster economic policy of the traffic light government also plays a role in this.

Since the beginning of 2022, the SDAX has lost 16%, the MDAX even 26%. The DAX, on the other hand, has recently been going from one high to the next and has gained almost 12% in this period.

Source: www.aktienscreener.com

MDAX: Decision is approaching. In the current year 2024, the DAX is up 6%. The MDAX, on the other hand, has lost 4% since the beginning of the year. For several weeks now, the mid-cap index has been sinking into lethargy. However, a decision in direction could be imminent in the short term. If the index breaks out of the triangle formation marked on the chart, an attack on the 200-day line at around 26,500 points is imminent.

Such a long phase of underperformance has never been seen before. A comeback of small caps is only a matter of time. Even though there are currently no clear signals for this, there should be great opportunities for you as an investor on a medium and long-term basis.