The DAX index had a great performance in the first quarter of the year as global stocks roared back. It soared by more than 26% this year, reaching a record high of €18,477. Most recently, the index has risen in the past eight straight weeks.

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German economic recession

This surge happened at a time when there are serious concerns about the German economy. Recent data revealed that the economy sank into a recession in the fourth quarter of last year. It is also expected to be the worst-performing economy in the G7 this year.

Additionally, liquidity has become a major challenge in Germany as interest rates have jumped to the highest point on record. 

Therefore, the DAX index is soaring because of the rising optimism that the ECB and other central banks will start cutting rates later this year. Most economists expect the ECB to deliver about three cuts in 2024.

They also jumped because of the general view that European stocks are bargains compared to their American counterparts. The S&P 500 index has a price-to-earnings ratio of 24 while the DAX has a multiple of 18.6. 

Rheinmetall, Siemens Energy, Daimler Truck stocks soared

Most DAX index constituents were in the green in the first quarter of 2024. Rheinmetall, the giant defense contractor, surged by over 78% this year as demand for weapons rose. Just this week, the company received €130 million from the EU to make more ammunition. 

Rheinmetall’s sales jumped by 12% in 2023 to over €7.1 billion as its backlog surged to over €38.3 billion. It also boosted its dividend to €5.70 per share from the previous €4.30.

Siemens Energy is the other top-performing DAX index company. Its stock has jumped by more than 37% this year as it avoided bankruptcy by receiving funding from the German government. There are signs that the wind industry has bottomed.

Daimler Truck stock price has surged by over 36% this year and by 54% in the past 12 months as demand for trucks jumped. Other companies in the industry like Paccar, Tata Motors, and Volvo are also thriving.

The other DAX index companies that are doing well are the likes of Heidelbergcement, Zalando, Airbus, and Munich Re. Airbus stock is thriving as Boeing, its biggest competitor, moves from one crisis to the other. 

Munich Re, the biggest reinsurer in the world, had a great performance in 2023, leading to higher dividends and buybacks.

There have been several key laggards in the DAX index this year. RWE, a big German energy company, has been the worst-performing company as it crashed by over 23%. The other underperformers in the index are Infineon, Bayer, and Continental.

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