DAX Monthly Fundamental Forecast – December 2016

November was an eventful month for the DAX as it was exposed to the vagaries of the fund flows across the world that was thrown into turmoil due to the Presidential elections in the US. The markets had assumed that Hillary would win the elections easily and had begun to price in the same and that helped to keep the DAX buoyant. But once the results started coming in, it became clear that Trump would win and the shock went through the markets and pulled down the DAX and stock markets all around the world initially. Then, better sense prevailed and the markets rallied all over once again and within 24 hours, the DAX fell by 600 points and recovered the entire fall, similar to markets in other parts of the world.

The latter part of November was spent in ranging and consolidation as the buyers and the sellers were not sure on which way to go as the buyers were not too interested in buying at such high levels and the sellers did not have the confidence to take it low as the German economy continued to throw up very strong data despite the turmoil in the rest of the euro region. Any economy that has its foundation in manufacturing, as is the case with Germany, will be able to survive through most economic crisis with no problems.

Looking ahead to December, we would expect the volatility and the liquidity to be low as there would be a range of holidays in the later part of this month and the trading would be thin. We have the Fed meeting during the middle of the month and the market expects them to hike rates and if this happens, then we can expect some funds to be pulled out of the stock markets and pushed into the dollar. So, in the coming month, we expect consolidation with a bearish bias and the DAX is likely to stay above 10000 as the German economy continues to remain strong.