The DAX is at a record high: Waiting for the Fed

Last Updated: 13. Dezember 2023By

The DAX has been rapidly moving from all-time high to all-time high in recent days. Yesterday, the German leading index set a new record high of 16,837 points (as of December 12th, around 9:30 am). Impressive: Since the end of October, the DAX has risen by almost 15 percent and the mark of 17,000 points is almost within reach.

The markets in the past weeks have been driven mainly by the hope of an end to the current monetary policy of the central banks – and lower interest rates next year. Today, investors are therefore looking forward to the US Federal Reserve. Depending on the signals that Jerome Powell will send, the rally can continue or even experience a real setback.

A lot of expectations have already been priced in for the DAX. Many investors now expect the Fed to lower interest rates already in the spring, at the latest in the summer of 2024. And the falling inflation in the US (3.1 percent in November – core inflation 4.0 percent) is fueling this hope. In addition, especially institutional investors do not want to miss the current rally at the end of the year and continue to buy.

A lot of expectations and hopes have already been priced in for the DAX’s course development in recent weeks. Unthinkable in October: For the leading index it is even possible for the first time in history to exceed 17,000 points by the end of the year. Investors should, however, bear in mind that expectations can also be disappointed and there may be corrections.

What is happening with the DAX now? Indeed, the monetary policy in the US seems to be achieving the desired effects on inflation, but the inflation rate is still too high, especially in terms of core inflation, from the Fed’s point of view. In the euphoric stock market phase, it is therefore quite conceivable that Fed Chairman Powell would like to lower the expectations of the market participants and advise caution. A commitment to possible interest rate cuts in the first half of 2024 would certainly be a real surprise.

For the DAX, various scenarios are now conceivable. If the Fed presses the euphoria brake, the rally could also be slowed down. If the signals are more confident, the Wall Street and thus the DAX could even go up further. In any case, it is likely to be a more than satisfactory end to the stock market year 2023.