Deutsche Bank keeps bullish view on German equities after growth cut

A senior analyst at Deutsche Bank says he remains more upbeat on German stocks than most of his peers, even as new economic data shows the country facing headwinds. Maximilian Uleer, who leads European equity and cross asset strategy at the bank, wrote in a note Friday that his team has been the “Lonely Bull on the DAX over the past years as compared to the sell-side consensus.” The DAX is Germany’s main stock index.

Uleer pointed out that German stocks have done better than even his own positive predictions for three years running. The DAX jumped 23% in 2025, beating all three major U.S. stock indexes. It also gained 20.3% in 2024 and 18.8% in 2023.

Forecasting bigger gains than peers

Right now, the index sits roughly flat for the year, while the S&P 500 is up 1.8%, the Dow has risen 2.1%, and the Nasdaq has climbed 1.9%. This divergence in performance has led many investors to question whether European equities can keep pace with their American counterparts in the coming months.

But Uleer thinks the DAX has a lot more room to run this year. He expects the index could rally 18% in 2026, well above the 8% gain that most analysts are predicting. His reasons include big government spending programs in Germany and a steady global economy.

“In our view, thanks to strong earnings growth and improving sentiment, the DAX could rally even more. Hence, we find ourselves lonely again, forecasting 18% upside for the DAX,” Uleer wrote. “Sounds overly bullish? It would have been too bearish for each of the past 3 years.”

Germany made major changes to its debt rules last year, opening the door for massive spending on defense and roads. The move lifted investor confidence in Europe’s biggest economy. “Germany is back,” said German Chancellor Friedrich Merz after taking office in May. This political shift toward fiscal expansion serves as the primary backbone for the optimistic targets currently being set by the strategy team at Deutsche Bank.

The DAX tracks some of Europe’s largest companies, including software maker SAP, insurance firm Allianz, and weapons manufacturer Rheinmetall.

Government cuts growth forecast amid challenges

The positive outlook faces its first big challenge this quarter. On Monday, February 2, 2026, the German Economy Ministry cut its growth forecast for the year to 1.0%, down from an earlier estimate of 1.3%. Officials cited ongoing trade problems and high energy prices as concerns.

Still, investors seem focused on the €500 billion infrastructure and defense fund that’s starting to help German companies. The DAX traded near the 24,500 mark on the first Monday of February, getting a boost from banks and sporting goods companies. Market participants are increasingly weighing these domestic policy supports against the broader global volatility that has defined the start of the new trading week.

Adidas shares jumped after the company said it would buy back €1 billion worth of its own stock. Deutsche Bank, which employs Uleer, has been one of the best performers in the index after reporting its highest annual profits ever for 2025.

While many analysts worry about slow growth, the DAX’s makeup of big international companies suggests their earnings might keep growing even if Germany’s domestic economy struggles.

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