A COUNTRY BATTLING recession, high energy costs and political uncertainty may be an unlikely home for Europe’s hottest stockmarket. But Germany’s DAX index, the benchmark for its 40 largest publicly traded companies, rose by 12% in dollar terms last year, making it one of the best-performing indices in Europe (see chart 1).
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Although stockmarkets often reflect the health of an economy, and investor confidence in it, the relationship is not always straightforward. Indices dominated by global firms can thrive even when domestic conditions are weak. As in many northern European countries, most of the revenues for companies listed in Germany come from abroad.
By far the biggest factor in the DAX’s outperformance, though,…
