A rather unusual picture: the German stock index has ended the week lower than it started for two consecutive weeks. A correction appears to be underway, one that could last longer than investors and market participants might expect or hope. It’s worth noting that the DAX has already delivered a return of over 15 percent in 2025. This figure is well above the average return of around 8.8 percent seen over the past 30 years. This fact alone makes it seem completely normal that a correction is necessary to prevent the overall stock market from overheating.
European equities in particular are still relatively cheap compared to US equities. Currently, investors are experiencing firsthand how difficult it is to attract fresh capital for stocks that are considered expensive. In other words, US markets are struggling to maintain their valuations and have been doing so for several weeks. However, US markets like the S&P 500 showed signs last week that the correction may be nearing its end. The seasonal indicators for the S&P are also positive, and indeed, the correction has been very well predicted based on seasonality. Should this scenario play out, the outlook for the DAX is quite favorable, suggesting the correction phase might soon be a thing of the past.
British Stock Market Facing a Decision
Slightly weaker than the DAX, the British stock index FTSE 100 has shown a return of just over 5 percent year-to-date—positive, but not particularly impressive. On a weekly basis, the index exhibits a stable upward trend, which has calmed somewhat in the last two weeks, without dampening the overall positive picture of the British stock market. If the index can hold above the 8,300-point mark, the weekly trend remains intact, although this doesn’t rule out the possibility of a temporary downward trend on a daily basis. The momentum at the beginning of the month might have been the initial trigger for this.
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