Deutsche Bank Doubles Down on Bullish German Equities Stance Despite Growth Forecast Cut

Growth projections get slashed, but the bulls aren't backing down. Deutsche Bank just reaffirmed its confidence in German stocks, even after trimming its economic outlook. It's a classic case of looking past the headline noise.

The Contrarian Bet

While other analysts scramble to downgrade, Deutsche's team is holding the line. They're betting that corporate fundamentals and sector-specific strengths will outperform a softening macro picture. It's a gutsy call in an environment where pessimism is the default setting.

Selective Over Sentiment

The strategy isn't blind optimism. It's a calculated focus on industries with resilient earnings and global exposure—think industrial automation, premium automotive, and sustainable tech. The message? Don't sell Germany short just because GDP math got a little uglier.

Finance's favorite parlor trick: downgrade the economy on Monday, upgrade the stocks on Tuesday. The only thing more volatile than the market is the analyst consensus itself.

Forecasting bigger gains than peers

Right now, the index sits roughly flat for the year, while the S&P 500 is up 1.8%, the Dow has risen 2.1%, and the Nasdaq has climbed 1.9%. This divergence in performance has led many investors to question whether European equities can keep pace with their American counterparts in the coming months.

But Uleer thinks the DAX has a lot more room to run this year. He expects the index could rally 18% in 2026, well above the 8% gain that most analysts are predicting. His reasons include big government spending programs in Germany and a steady global economy.

“In our view, thanks to strong earnings growth and improving sentiment, the DAX could rally even more. Hence, we find ourselves lonely again, forecasting 18% upside for the DAX,” Uleer wrote. “Sounds overly bullish? It WOULD have been too bearish for each of the past 3 years.”

Germany made major changes to its debt rules last year, opening the door for massive spending on defense and roads. The MOVE lifted investor confidence in Europe’s biggest economy. “Germany is back,” said German Chancellor Friedrich Merz after taking office in May. This political shift toward fiscal expansion serves as the primary backbone for the optimistic targets currently being set by the strategy team at Deutsche Bank.

The DAX tracks some of Europe’s largest companies, including software Maker SAP, insurance firm Allianz, and weapons manufacturer Rheinmetall.

Government cuts growth forecast amid challenges

The positive outlook faces its first big challenge this quarter. On Monday, February 2, 2026, the German Economy Ministry cut its growth forecast for the year to 1.0%, down from an earlier estimate of 1.3%. Officials cited ongoing trade problems and high energy prices as concerns.

Still, investors seem focused on the €500 billion infrastructure and defense fund that’s starting to help German companies. The DAX traded NEAR the 24,500 mark on the first Monday of February, getting a boost from banks and sporting goods companies. Market participants are increasingly weighing these domestic policy supports against the broader global volatility that has defined the start of the new trading week.

Adidas shares jumped after the company said it would buy back €1 billion worth of its own stock. Deutsche Bank, which employs Uleer, has been one of the best performers in the index after reporting its highest annual profits ever for 2025.

While many analysts worry about slow growth, the DAX’s makeup of big international companies suggests their earnings might keep growing even if Germany’s domestic economy struggles.

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