Germany’s DAX: What You Can Learn from the 2007 Top
Why investors should be aware of a divergence between stock prices and consumer confidence
by Bob Stokes
Updated: March 24, 2022
Among the scores of stock market indicators, there's at least one that may be off many investors' radar screens.
And, that is the trend in consumer confidence. Specifically, a peak in consumer confidence tends to precede a peak in the stock market.
With that in mind, back on Nov. 25, the Telegraph said:
Consumer confidence has dropped sharply in Germany...
A few days later, our December Global Market Perspective provided a retrospective of Germany's DAX and consumer confidence with this chart and commentary:
As the DAX approached its July 2007 peak 14 years ago, a telling divergence popped up between stock prices and consumer confidence. The GfK Consumer Confidence indicator, which surveys about 2,000 households every month, reversed in December 2006, seven months before the DAX reversed. Consumer confidence fell for three months, and then rallied to a secondary but lower peak in July 2007, coinciding with the stock market's final top on July 13, 2007. Only then did the bottom fall out.
Market history usually does not repeat exactly, however, do know that the DAX is trading lower than it was at the time of that big drop in consumer confidence, which the Telegraph reported in November.
The key takeaway is that consumer confidence tends to trend with stocks.
Indeed, here's one of the more recent headlines about consumer confidence in Germany (Dow Jones Newswire, Feb. 23):
German Consumer Confidence Is Expected to Continue Its Downward Trend
Does this mean that a big crash is just ahead for Germany's main stock index?
Well, you can get a good idea of what to expect next for the DAX as you look at the index's long-term Elliott wave labeling in our March Global Market Perspective. Inside the same issue, you'll find analysis of the DAX's price-to-sales ratio, as well as the price-to-book ratio.
If your investment interests extend beyond Germany, know that the Global Market Perspective also provides financial analysis for other major markets in Europe, as well as the Asian-Pacific and the U.S.
Follow the link below to tap into timely global financial insights now.
What Will Your Global Portfolio Look Like a Year from Now?
In six months? Or even just a month from now?
These are the bottom-line questions that most investors ask themselves.
Realize that our global Elliott wave experts do their best to help you position your portfolio for what they see for global financial markets in the near-, intermediate- and long-term.
Get their latest forecasts for the Asian-Pacific, Europe and the U.S. now by following the link below.
Global Market Perspective
Monthly - $77/mo
Get the next timely issue of Global Market Perspective as soon as it's published.
You can be ready for global risks and opportunities that catch most investors by surprise.
GMP gives you a complete, useful perspective that you cannot find anywhere else.
The price of the U.S. "long bond," the 30-year Treasuries, is down 50% since 2020. The corresponding rise in interest rates has been reshaping the financial landscape. When might interest rates come down? Watch Market Trek host Brian Whitmer give a one-of-a-kind, Elliott wave-based explanation that has nothing to do with the Fed or economy.
The market for zero-day options is so hot that an exchange-traded fund has been created. Yet, this casino-style action will likely result in even more billions being lost. Even so, these two charts reveal that many speculators are reveling in high risk.
Just over 100 years ago Argentina was one of the world's most prosperous countries. How things have changed... Now that Argentina has a flamboyant new president, what does social mood suggest for the country next? The editor of our Global Rates & Money Flows service Murray Gunn shares his thoughts.