The surge in Volkswagen shares last week that helped German stocks higher underlines the DAX as a cyclical recovery play.
The DAX outperformed European stocks overall last week with the DAX edging ahead of the FTSE MIB. A large part of the rally has been as Volkswagen bids to rival Tesla in electric vehicles. Volkswagen overtook SAP as Germany’s most valuable public company. The slowdown in Germany remains as the vaccine rollouts are dogged by delay. Eventually, though, the recovery should come to Germany. That is of course with all the caveats that we currently have regarding how the variants will develop and the pandemic proceed.
Bloomberg survey puts DAX ahead of the European pack
On average the anticipated gain is 2% by the end of the year. This is slightly more than in February. Since the start of February, the DAX’s 12-month forward price target percent change has moved ahead of other European peers. Now the timing for this trade is tricky. At the moment there are some concerns that the relation trade has moved ahead of itself. Germany is in extended lockdowns, AstraZeneca has a popularity problem after some concerns surround its safety, and oil prices have taken a hit recently. One option is to take a breakout on the DAX in line with key technicals or wait for a deeper pullback.