German election results signals shift of priorities for investors, deVere’s Green says

Investing.com -- The recent election results in Germany have led to a decisive response from markets and investors. The euro has strengthened and stocks have climbed as expectations rise for economic reform and fiscal stimulus under the new leadership of Friedrich Merz.

The conservative CDU/CSU bloc, led by Merz, is currently in coalition negotiations. This has fueled optimism about a potential shift towards a more expansionary economic approach. The broader geopolitical landscape, including uncertainty over US foreign policy and Russia’s strategic positioning, has increased the importance of Berlin’s next steps.

Nigel Green, CEO of global financial advisory giant, deVere Group, stated that Germany, Europe’s economic powerhouse, has experienced two consecutive years of contraction. This has raised urgent questions about its fiscal policy and growth prospects. Green also mentioned that investors are showing interest in the long-debated ’debt brake’ that limits structural budget deficits.

Investors are hopeful that the new government will adopt a more proactive stance on economic stimulus. They believe that the potential relaxation of Germany’s stringent fiscal rules could provide a boost to the eurozone economy, offering significant upside for risk assets.

A decisive shift in fiscal policy would have an impact on multiple sectors. German defense stocks have seen a strong start to 2025. Companies in this sector stand to gain from a government committed to military expansion. Europe’s broader rearmament efforts are likely to speed up, with hundreds of billions of euros in potential investment on the horizon.

Green added that the election outcome is giving investors confidence that Germany will take decisive action to strengthen its economy and global position. A coalition that prioritizes fiscal expansion, defense spending, and pro-business reforms would present compelling opportunities for global investors.

The geopolitical landscape is changing quickly. European leaders are recognizing the need to strengthen their security. Friedrich Merz has spoken about the need for Europe to bolster its own defenses, especially in response to a less predictable US foreign policy and the strategic pressures from Russia.

Defense sector stocks have been performing well. If Berlin commits to increased spending, European industrial giants will benefit. However, the composition of Germany’s next coalition is still critical. Left-leaning parties would likely curb military expenditure, tempering some of the recent enthusiasm in the sector.

The election outcome is also crucial for Germany’s struggling real estate sector. Investors are closely monitoring new policies that will address housing shortages and rent freezes. For the automotive industry, policy decisions on electric vehicle incentives and emissions regulations will be scrutinized.

Green noted that while German automakers have lagged behind their US counterparts, the potential for regulatory easing and new incentives could provide tailwinds for the sector.

Industrial policy is another pressing issue. Increased government infrastructure investment, particularly in energy and transport, could unlock significant opportunities for global investors seeking exposure to European growth.

The euro, which recently dipped amid fears of US tariffs, has rebounded in response to Germany’s election result. Confidence in the single currency could strengthen further if the next government pursues a more expansionary fiscal path.

Green concluded that while uncertainty remains, the underlying market trends are clear. Germany’s political transition signals a critical moment for global investors, with potential opportunities in defense, infrastructure, and currency markets. If Berlin embraces reform, the effects will be felt across global financial markets.

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