Is the German stock market due for a correction?

The impressive DAX gains over the past two years are largely attributable to higher valuation metrics.

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Andreas Hürkamp

Commerzbank Kapitalmarktstrategie

08/22/2025

This is because the profits of DAX companies have hardly risen at all, partly due to the weak economy in Germany. However, thanks to Germany's expansionary fiscal policy and the tailwind provided by lower interest rates from the ECB and the US Federal Reserve, DAX corporate profits are likely to pick up noticeably in the coming year. Investors should therefore hold on to their DAX positions and continue to expand them in the coming months during temporary DAX setbacks.

DAX records despite stagnating profits

DAX investors have been enjoying impressive gains since the beginning of 2024. The DAX price index, which does not take into account annually distributed dividends, has risen by an impressive 37% since then. Analysts' expectations for DAX corporate earnings over the same period have hardly moved, rising by just 4% in a good year and a half.

Analysts have revised their earnings forecasts sharply downward for several industries that play an important role in the German economy and thus also in the German stock market. For the automotive sector in Europe, for example, analysts have adjusted their 2025 earnings estimates downwards by 58% since the beginning of 2024, while earnings forecasts for the chemical sector have fallen by 24% and estimates for the industrial sector have also been revised downwards by 9%. There are currently only a few sectors in Germany and Europe such as the banking sector with a positive earnings revision momentum.

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