Equities analysts from the Association of German Public Banks (VÖB) expect increased volatility in the coming months, particularly in the S&P 500, where global economic policy uncertainty has intensified since Donald Trump became President in January. The various VÖB analysts forecast that the Dax will range between 22,000 and 25,000 points over the next 12 months.

In Germany, although volatility has risen, Helaba Director Markus Reinwand says that the market has actually remained „surprisingly calm“ give concerns over trade tariffs.

Reinwand notes that expectations of increased government spending on defence and infrastructure have significantly driven German stocks since the beginning of the year. „There has already been a lot of advance praise“, he says.

From a valuation perspective, both the Dax and EuroStoxx 50 have entered „expensive territory“, although US stocks remain pricier. „This makes the current risk-reward ratio less attractive," says Reinwand.

The analysts tend to agree that European stocks will continue to outperform American stocks this year. Trump’s tariff policies will negatively impacted the US economy, particularly the auto industry, which relies on supply chains from Mexico and Canada, says Wolfgang Donie of Nord/LB. Rising uncertainty is also dampening corporate investment and growth. Nevertheless, Nord/LB forecasts the S&P 500 at 6,400 points in 12 months, higher than Helaba (5,850) and LBBW (5,800), and expects the Dax at the lower end of VÖB's forecast range at 22,000 points.

„While setbacks are expected, we believe the political growth and sentiment boost will continue to support the markets," comments Deka's head of capital markets, Joachim Schallmayer.

The VÖB analysts hold differing views on interest rate policy, and Schallmayer expects central banks to continue supporting stock markets, forecasting two rate cuts each from the Fed and ECB this year. However, he also acknowledges that central banks, especially the Fed, are in an „increasingly difficult position“. „We have the unusual situation where we have revised Germany's growth forecasts upward while lowering those for the US. In addition, inflation remains persistent, particularly in the US.“

Manfred Bucher of BayernLB believes the Fed may act more restrictively than previously expected. He anticipates a „longer interest rate pause by the Fed until 2026“ and only one more rate cut by the ECB.

Bucher assumes that a higher interest rate level is „manageable for the stock markets“, a view shared by Schallmayer, who expects central banks to „disregard“ inflation that is directly driven by tariffs.

At the same time, the VÖB analysts believe that the approved debt-financed public investment package, which is spread over a decade, will ease upward pressure on bond yields. Since the 10-year German government bond initially jumped by 30 basis points in one day in response to the package, its rise is now expected to slow. However, Berndt Fernow (LBBW) expects that, in the medium term, the massive spending programs will push bond yields higher and thus weigh on stock markets. LBBW no longer favours equities across the board.

The strategists agree that investors should pay closer attention to mid-cap stocks. While the MDax has remained virtually stagnant since 2022 and the earnings growth of smaller companies has lagged behind Dax corporations, the public investment package could shift the balance.