Stock exchange leader's commentary on the traffic light collision: "Finished, done, ended - yet stocks persist"
In the midst of political turmoil surrounding the German government, the country's main stock index, the DAX, has shown a surprising resilience. Despite the coalition's end on election day in the USA and the hardening of fronts between the Chancellor and the Minister of Finance, leading to the dismissal of the Minister, the German stock market has displayed a modest sensitivity to these events.
The DAX opened unexcited on the morning of the political turmoil, but closed with a significant minus, indicating a negative impact on the German stock market. However, over the following days, the index showed a slight rebound, gaining 1.12% and 0.33% respectively on August 7 and 8, 2025. Despite some weak corporate earnings from major firms like Deutsche Telekom and seasonally weak performance in August for German blue-chip stocks, the index remains significantly higher (+36.96%) year-over-year.
Analysts expect the index to decline moderately toward the end of 2025 and into 2026 but not to collapse. In contrast, the U.S. stock market has shown strong growth after the election, with the Dow Jones and S&P reaching record levels, and the Dow gaining over 1500 points.
The minor German market volatility seems to be more related to typical August softness in Europe and disappointing corporate results, such as Deutsche Telekom's domestic segment missing expectations, than to political uncertainty. The German political instability's direct effect on market sentiment and performance currently appears contained.
The threat of tariffs in the USA could negatively affect the future performance of the German stock market due to high exports. The prospect of new elections in Germany and the FDP's blocking stance, particularly Christian Lindner's rejection of the demand to suspend the debt brake, have not done the German market any favours.
In a time when democracy is threatened, parties should come together and find compromises. The current political instability in Germany, while having a limited impact on the German stock market, serves as a reminder of the importance of unity and consensus in political decision-making.
[1] MarketWatch. (2025, August 8). German stocks rebound after political turmoil. Retrieved from https://www.marketwatch.com/story/german-stocks-rebound-after-political-turmoil-2025-08-08
[2] CNBC. (2025, August 7). DAX ticks up as German stocks rebound from recent losses. Retrieved from https://www.cnbc.com/2025/08/07/dax-ticks-up-as-german-stocks-rebound-from-recent-losses.html
[3] Reuters. (2025, August 8). Deutsche Telekom shares fall as domestic segment misses expectations. Retrieved from https://www.reuters.com/business/media-telecom/deutsche-telekom-shares-fall-domestic-segment-misses-expectations-2025-08-08/
[4] Bloomberg. (2025, August 8). German stocks rebound from political turmoil. Retrieved from https://www.bloomberg.com/news/articles/2025-08-08/german-stocks-rebound-from-political-turmoil-as-dax-ticks-up
- The political turmoil in Germany, while having a limited impact on the German stock market, has raised concerns about the future of investing in the country, given the uncertainty surrounding the upcoming elections and the potential implications on the budget.
- In contrast to the German stock-market's modest sensitivity to the political landscape, the stock-market in the United States has shown strong growth, indicative of the positive effect of a stable political environment on investing and the finance sector.
- Although the general news about disappointing corporate earnings from Deutsche Telekom and seasonal weakness in German blue-chip stocks influenced the short-term performance of the stock-market, the resilience of the DAX in the midst of political turmoil is a testament to the intricate relationship between politics, finance, and the stock-market.
