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Metzler: Steady upswing on the German stock market to remain intact in 2018

(lifePR) (Frankfurt, ) The analysts at Metzler Capital Markets are optimistic for 2018. According to Metzler strategist Hendrik König, the largest world economies will likely continue on their upward trend, albeit at a slower pace than in 2017. He believes the risks that could arise from less monetary stimulus are limited. "Comparing historical interest rate development with the course of the German stock market, we see that when lessening monetary stimulus goes hand in hand with steady economic growth, this has a positive impact on the stock markets - at least initially". König thus expects the upswing on the German stock market to remain intact. However, he also believes we can expect significantly higher volatility than in 2017.

The average PE ratio of DAX stocks has reached an impressive level. In this environment of slightly rising interest rates, König sees only little upward leeway. Therefore, a further index hike will depend on further earnings improvements. Metzler analysts predict the DAX will reach a peak of 13,900 points in 2018 based on current consensus estimates for DAX corporate earnings and the historic PE valuation range.

The conditions for continued economic growth in Germany have certainly been met, assuming there are no major political upsets and that Germany can form a new government without new elections. Another coalition of the parties CDU/CSU and SPD would likely lead to rising investment in infrastructure. Topics like funding for families and equal pay for equal work would probably have high priority, too. Furthermore, with the departure of Wolfgang Schäuble as Finance Minister, the strict austerity policy would probably be loosened. Overall, this means that strong private consumer spending would continue - another important factor supporting further economic growth. Analysts see cause for concern in the upcoming parliamentary elections in Italy where anti-Europe parties are likely to make significance gains.

From a bottom-up perspective, the analysts at Metzler Capital Markets prefer stocks in companies that are likely to benefit from the following investment themes: an ongoing solid global economic upswing, possible growth initiatives of a new German government, structural sector growth trends like digitization, and a gradual normalization of monetary policies by relevant central banks. The Metzler analysts highlight interest-rate-sensitive stocks, e.g. insurance and bank stocks, and undervalued stocks in cyclical sectors.

Top recommendations

Based on a bottom-up analysis, Metzler sector analysts recommend buying shares in 2018 in the following companies (among others): Hapag Lloyd, RWE, Salzgitter, HeidelbergCement and Munich Re - for these stocks they see the most share price upside. However, they recommend exercising caution particularly for shares in Alstria Office Reit and Aareal Bank.


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