DAX Outlook: Between Hopes for Interest Rates and Fears of a Crash

After a conciliatory end to November, the year-end rally is now back on the table. While the US interest rate cut seems to be a done deal, the topic of AI valuation remains controversial. The development of Bitcoin continues to be striking. 

Hopes for a US interest rate cut on the one hand and concerns about an AI bubble on the other continue to dominate the markets. The probability of a US interest rate cut has risen sharply recently and is now priced in at almost 100 percent. “If our forecast of another key interest rate cut on December 10 is correct, the stock market recovery is likely to continue in December,” says Commerzbank analyst Pascal Reichert.

The DAX stood at 23,695 points on Monday morning, slightly below Friday’s closing level of 23,837 points. The US stock markets continued to recover on “Black Friday” with shortened trading hours and are not far from their record highs. The situation with cryptocurrencies remains striking: after temporarily exceeding US$90,000, Bitcoin is currently trading at only US$86,000 again – around 30 percent below its all-time high.

How was the shopping weekend?

According to Ulrich Kater from DekaBank, the stock market’s performance in the near future will initially depend on retail sales over the Thanksgiving weekend. “These are seen as an indicator of how Christmas business will go,” he explains. According to a recent ifo survey, the majority of retailers in Germany do not expect Christmas sales to pick up compared to last year. However, this is also seen as an opportunity: if sentiment and the economic situation are at record lows, this has already been reflected in share prices. “This means that the probability of an improvement is higher than that of a further deterioration.”

“No crash, but ‘smaller rolls’”

LBBW Chief Economist Moritz Kraemer is already looking ahead to next year. “We believe it is increasingly likely that investors’ expectations will prove unrealistic,” he explains. The risk of corrections is rising. Never before has the US market been driven by so few individual stocks as it is today. More than 40 percent of the capitalization in the S&P 500 is accounted for by the top ten stocks. “Almost all of these stocks are riding the same AI wave.” But even the broader market is expensive from a historical perspective, even in this country. “We are not predicting a crash, but the stock markets are likely to be much more modest in the coming years.”

“Continued AI boom in 2026”

The fund company DWS, on the other hand, continues to see opportunities for 2026 in light of strong growth in the US and Europe and low interest rates. “AI investments and sustained robust earnings growth are likely to drive the S&P 500 to around 7,500 points by the end of 2026,” explains Benjardin Gärtner. “We don’t see an AI bubble, we see a continued AI boom.” This could lead to significant productivity gains in the coming years. There will be setbacks along the way, as with any technological revolution. But the growth story remains intact. In addition, European markets are benefiting from fiscal stimulus, albeit at a slower pace. DWS forecasts 600 points for the Stoxx Europe 600 and 26,100 points for the DAX at the end of 2026.

Important economic and business data

Wednesday, 3 December

SDAX index review: Changes will be published after the US stock market closes.

Friday, 5 December

8:00 a.m. Germany: October order intake. After recent rather disappointing data, Commerzbank believes that order intake in German industry is likely to have risen slightly more strongly again. It expects an increase of 1.5 percent compared to the previous month.
4:00 p.m. US: Consumer price index excluding food and energy for September. DekaBank expects the index, which is published with a delay of more than a month, to rise by just under 0.2 percent. The annual rate of change would thus fall slightly from 2.9 to 2.8 percent.