„The capital markets remain resilient“ is the key statement made by Deka in its half-year outlook presentation to the press, held at its new premises in the Four office towers in Frankfurt. The asset manager believes that the German stock market in particular has above-average prospects. „We assume that the DAX will end the year at around its current level of 24,000 points and reach the 26,000 point mark in the next twelve months,“ said Joachim Schallmayer, Head of Capital Markets and Strategy at Deka. As he does not see the structural upward trend of the stock markets in danger, he advises against short-term and hectic buying and selling.

German and European equities are still valued far more favourably than US stocks. The shifts from US stocks to Europe are therefore likely to continue in the coming years. According to the markets expert, European second-tier companies should continue to receive special attention. „Many MDax companies have been able to emerge from the shadowy existence of recent months,“ he points out. There is still catch-up potential, valuations are below long-term averages at 15.5 times earnings, and are likely to rise further in the coming quarters.

The acute crisis in the Middle East has hardly had any negative impact on the economy so far. However, following the latest military intervention by the USA, uncertainties have increased again for the time being. „The financial markets are currently in risk-off mode. In the short term, we will have to wait and see what further escalation risks there are,“ explained Deka chief economist Ulrich Kater. However, higher energy prices would only have a major economic impact if the increase is very strong and long-lasting, over a period of six months or more. Such an energy price shock occurred in 2022 after the invasion of Ukraine. Deka does not expect such an extreme event to occur this time. The bank has therefore not changed its oil price forecast. „In the long term, we assume that the oil price will be below the 70 dollars mark per barrel,“ says Kater. The reason for this is that the crude oil market is in an oversupply situation, beyond the geopolitical tensions.

Despite the current escalation in the Persian Gulf, Deka's economists expect global economic growth of 2.8% in 2025. This would mean growth would be 0.5 percentage points lower than in 2024. „Geopolitical conflicts and an unpredictable US tariff policy are weighing on the global economy, but it is surprisingly robust in view of the global political upheavals,“ said Kater. The USA in particular is feeling the effects of slower growth. The Deka experts are forecasting growth of just 1.5%, after the USA was still able to generate growth of 2.8% in 2024.

In Germany, on the other hand, hopes of an upturn are in the air. Domestic demand in particular is recovering, driven by real income growth, lower interest rates and the hope of economic policy reforms. In addition, there is the fiscal stimulus provided by the federal government's planned additional spending. Together with the ongoing stronger momentum in Germany's neighbouring countries, Deka is forecasting growth of just under 1% for the eurozone in the current and next year „Against the backdrop of lasting uncertainty in US politics, there are opportunities for the European economy to shake off its image as the ugly duckling of the global economy.“

On the interest rate side, Deka's economists expect a further reduction in the deposit rate to 1.75% in September. „In autumn, a compromise is likely to emerge in the ECB Governing Council to leave monetary policy at the lower end of the neutral range for the time being,“ said Kater.

„The capital markets have been in good shape so far in the first half of the year. Companies that operate globally are proving to be very resilient to the current uncertainties,“ added Schallmayer. All the major share indices have been up since the beginning of the year, with the European indices making particularly strong gains and the Dax even occupying a top position globally with a plus of around 20%. After the strong first half of the year, Schallmayer initially expects a consolidation over the summer months.

He does not expect a pronounced correction in US equities, but believes that they will only move sideways over the next 12 months, while European equities are likely to rise solidly. He sees a lasting change in sentiment as the main reason for this development. „A change in sentiment is underway among international investors, which should ensure sustained inflows into European equities and support share prices,“ says Schallmayer.

In the first half of the year, the weak US dollar significantly diluted returns for investors who calculate in euros. This is unlikely to be repeated in the second half of the year. „We expect exchange rates to stabilise at the current levels.“

In the case of bonds, rising government debt in all regions has led to a rise in interest rates, particularly for long-dated securities. With regard to German government bonds, he expects renewed nervousness on the market, due to the significant increase in the volume of German government issues, but not a fundamental further rise in interest rates. „The yield curve will be steep for the foreseeable future, with the long end hardly moving at all and the short end still moving slightly downwards", he forecasts.

Schallmayer continues to see the greatest yield opportunities in corporate bonds. It is true that risk premiums are at a low level. However, the global trend of falling key interest rates and the stable global economy are providing strong support. „We hardly expect any additional performance from falling spreads and yields, but the current income still offers attractive investment opportunities", he says.