Why now is the time to invest in Germany

Linda J. Dodson

Zoom in a bit further and the Dax is actually starting to pull away. It has risen 13pc since the beginning of June – around twice the S&P’s gain over the same period. 

The UK and Japanese markets have, by the way, both moved sideways over those two months. In part, this simply reflects the differing pandemic experiences in Germany and the US.

Germany has faced exactly the same challenge as other countries. Its 183,000 infections by the beginning of June ranked it ninth in the world. But its death rate, at around 100 per million of population, has been a fraction of that in other European countries. 

Despite one of the region’s least-draconian lockdowns, Germany was able to declare the outbreak under control within six weeks of its first death. By contrast, the US remains in the grip of the pandemic, with one in four of the world’s total infections and more than a fifth of deaths. The rapid emergence from the Covid-19 crisis is showing up in Germany’s economic data, with last week’s purchasing managers’ indices for services and manufacturing both significantly better than expected.

By contrast, the recovery in America’s famously flexible jobs market ground to a halt last week, with the first weekly rise in unemployment benefit claims for four months just days before a $600-a-week (£469) lifeline for the jobless is due to expire. The improvement in the German economy is starting to be reflected in the more cyclical parts of the stock market, which have significantly lagged the defensive firms favoured by investors in recent years. 

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