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Investing.com -- German equities may be unloved, but Deutsche Bank argues the pessimism has gone too far.
In a note headed by Maximilian Uleer, the bank’s head of European equity and cross asset strategy, Deutsche Bank said “low positioning and improving news flow provide the ingredients for a second leg up,” calling Germany “a market with no AI fears, decent valuations as well as ample fiscal room and stimulus.”
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Deutsche Bank says sentiment toward German stocks has cycled through “excitement,” “wait-and-see,” and “impatience” this year.
After strong early gains, the DAX and MDAX fell behind the STOXX 600 by 5 percent and 8 percent since September, driven by “significant outflows from German equities.”
But the bank believes investors have misread the situation, saying the mix of low positioning and “overly negative interpretation of market-friendly reforms and stimuli” now creates “a very interesting buying opportunity.”
Crucially, Deutsche Bank believes the German fiscal impulse is “now finally coming through,” with the 2026 budget “most likely” to pass the Bundestag today.
The bank argues that markets have failed to recognise the “undoubtedly positive medium-term implications for German companies with a strong domestic footprint.”
Deutsche Bank also highlights a series of supportive reforms, saying that while the longer-term economic effects may be debated, the “implications for markets look straight-forward.”
These include energy subsidies that will “positively contribute to higher margins,” accelerated depreciation that acts as “an indirect tax cut for corporates,” and infrastructure spending that should lift profit margins where capacity is tight.
The bank concludes that the combination of low exposure, improving policy visibility and underappreciated reforms sets the stage for a rebound.
“We expect a second leg up from here,” Deutsche Bank declared, arguing that Germany now offers one of Europe’s most compelling entry points.