Bankhaus Metzler is preparing for another year of strong performance in German equities. The nearly 20 percent rise in the DAX this year will likely not be matched in 2026, said equity strategist Uwe Hohmann, but an increase of 10 percent is within reach.
He made the remarks in an interview with Investment Officer. According to the most recently published figures, Bankhaus Metzler manages 77 billion euro.
The 500 billion euro reserved by the federal government for infrastructure investments, plus the additional funds earmarked for defense spending, will have a noticeable impact on the economy next year. Bankhaus Metzler therefore expects the German gross domestic product to grow again in 2026, after three years of stagnation, despite increasing pessimism about the cabinet’s promised reforms.
“If you convert the investment in infrastructure and digitalization plus the additional funds for rearmament into annual investment flows, that conservatively adds 0.8 percentage points to growth,” Hohmann said. “Because 2026 has more working days than 2025, another 0.3 percentage points are added, which brings us to slightly above 1 percent growth.”
Themes preferred over sectors
When the bank translates its positive equity view into asset allocation, the distinction between themes is more important than the distinction between sectors, according to the firm. Shares of German companies that benefit from the government’s push for infrastructure, digitalization, and rearmament will be the first to attract attention next year. This applies especially to certain technology and infrastructure companies, Hohmann expects.
Bankhaus Metzler does not foresee much momentum from the German consumer, the domestic corporate sector, or exports in the first half of 2026. Whereas export demand from markets such as the United States and China traditionally helped pull the economy out of downturns, those regions currently show less appetite for German goods—partly for political reasons, Hohmann notes. As a result, the equities he expects the least from for now are those of companies that export products manufactured in Germany to the United States and China.
Consumer companies
German consumers are keeping their wallets closed for the time being. Real wages are rising again after years of decline, but due to pessimistic news about the economy and large-scale layoffs, consumers prefer saving over spending. If the economic outlook improves, however, spending should pick up again, Hohmann said. “That is why I expect consumer companies to become interesting again in the second half of 2026.”
Geographically, Metzler prefers Europe, where equities are more attractively valued than in the United States. Compared with an estimated average price-to-earnings ratio of 23 for the S&P500, the DAX trades at roughly fifteen times earnings. “That premium is justified when you consider the number of tech companies and economic growth in the United States in recent years,” Hohmann said. “But since we believe growth in Europe, especially in Germany, will pick up again, those differences should narrow. That should also be reflected in the valuations of German equities.”
According to Hohmann, the normalization of growth in Europe is supported by favorable interest rates at the European Central Bank. “We expect one more interest rate cut of a quarter percentage point early next year, but even if that does not happen, rates in Europe remain relatively low and supportive for investment,” he said. He expects four rate cuts from the Fed.
Tension between China and Japan
Geopolitical developments that could disrupt capital markets continue to loom in the background, Hohmann warned. “For example, there is still tension between China and Taiwan, which is a crucial hub in global chip production. Then there is the war in Ukraine. The market does not yet assume that the situation will change anytime soon, even though recent developments could lead to some form of peace. Third, I am watching France, where debt refinancing could become an issue next year.”
Domestic developments are also worth monitoring. “Here in Germany, we have five state elections next year, and the coalition parties are heavily focused on how to position themselves against the rising AfD. That will also echo in Berlin, as it may make it harder to reach compromises needed to implement essential reforms.”
This article was originally published on Investment Officer Germany (DE).