FrankfurtBASF, Bayer, BMW, Continental, Covestro, Daimler, Deutsche Bank, Deutsche Post, Fresenius, Fresenius Medical Care, Heidelberg Cement, Thyssen-Krupp – the series of Dax companies that warned investors this year of declining earnings long.
And she has not left the German market without a trace. On the contrary: With a minus of 18 percent, Germany's flagship index has lost more than many other European stock market measures this year and is at its lowest level in two years.
Dax, unlike other European stock market indices, even includes dividends. Without these, the minus in the Dax is even more than 20 percent. In the second and third series of exchanges, companies such as the automotive suppliers Grammer, Leoni or Fuchs Petrolub, the DIY chain Hornbach, the Mediamarkt-Saturn parent Ceconomy, the Metro retail chain, the lighting manufacturer Osram or the online retailer Zalando also appealed to investors for falling profits.
This avenges what has made German stocks so successful in the long periods of economic recovery. Cyclical and export-driven companies dominate the indices. In times of trade disputes, Brexit and fears over the economic development, this does not get along well with investors.
That's why 2019 will be a difficult year for investors. Especially the Dax is now cheap from the reviews ago. With a price-earnings ratio of less than eleven, the Dax is cheaper than other European exchanges.
The P / E ratio means that equities are valued at almost eleven times their expected average earnings for the coming year. In the broad European stock index Stoxx Europe 600 the P / E is 12, according to analysts estimates.
But that only applies if the companies actually generate the expected profits in the coming year. Andreas Hürkamp, equity strategist at Commerzbank, has his doubts about this: He expects overall earnings growth of only two to four percent for the Dax companies in 2019.
This is well below the consensus estimates of twelve percent, emphasizes the strategist. He considers the consensus estimates to be too high against a background of weaker economic growth and rising labor costs.
Nevertheless, Commerzbank expects the DAX to rise slightly at the end of the year and forecasts a level of 12,500 points at the end of 2019. This is even slightly above the median of 12,000 points that the 14 banks predict, which the news agency Bloomberg has asked for their forecasts. A final score of 12,000 points would mean a Dax annual increase of about 13 percent from the current perspective.
But all banks provide their views with many restrictions. The Dax will rise only if the US-Donald Trump-led trade dispute does not continue to escalate, Brexit is not chaotic, the US Federal Reserve does not stifle the economy too much by raising interest rates and the budgetary risks in the Eurozone are rising New debt in Italy and France does not increase further.
And exactly there are many question marks. As a result, many banks expect the first half of the year to be very difficult given the March elections to the European Parliament and the decision to leave the European Union on 29 March.
Unicredit believes that the Dax will fall as high as 9,500 points in the first half of the year. The Dekabank is also careful about the coming months.
This is also because the mood in the market is currently so bad. The Dax has slipped into a so-called bear market with a loss of over 20 percent since its all-time high of 13,597 points in January 2018. Many investors now fear even further falling prices and do not dare to stand against the trend.
Only when there is a sustained easing on issues such as the trade dispute or the Brexit do German stocks also have the potential for rising prices again. At first, however, should probably apply: German stocks are cheap, but not cheap enough.
Create 2019 – All parts of the series
At the turn of the year, the Handelsblatt editorial team gives an insight into and views of various asset classes and investment opportunities. The series has 16 parts and runs until the beginning of January 2019. During the course of the day another episode goes online.
Part 1: Shares Germany