Germany Stock Market Valuations and Expected Future Returns

Updated at Sat, 25 Jan 2020 20:30:07 -0600
Country: Germany (updated daily) check out Global Overview for detailed methodology.

Ratio of total market cap over GDP: Maximum - 58%; Minimum - 13%; current - 49%
Expected future annual return: 3.4%

ETF Used for dividend yield: EWG (Yield=5%)
Market Index used: DAX Kursindex
Current Annual GDP: $3,760 billion US dollars or 3,395 in billions of national currency (GDP in Local Current Prices Annual Growth=2.89%)
Data since year 1990

Germany Historical GDP Growth

Historical GDP of Germany in billions of national currency. The GDP in local current prices has grown at the annual rate of 2.89% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $3,760 billion US dollars or 3,395 in billions of national currency.

Germany GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Germany in billions of national currency. This value is normalized using the data published by WorldBank. DAX Kursindex is used for the normalization. DAX German DAX Kursindex, data back to 1990. We did not use CDAX German all share index, because it goes back to 2000 only. We did not use DAX because it includes dividends. Normalization factor is calculated with the market cap over GDP ratio of 43.2% as of Dec. 30, 2010, according to WorldBank data

Germany Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Germany is 49%. The historical high was 58%; the historical low was 13%. If we assume that the ratio will reverse to the historical mean of 33% over the next 8 years, the contribution to expected annual return is -4.45%. This is the detailed historical chart of the ratio.

Germany Ratio of Total Market Cap over GDP (%)

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Germany stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the average ratio of 33% over the next eight years.

The blue line indicates the actual, annualized return of the Germany stock market over eight years. We use “DAX Kursindex” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of Germany


The stock market of Germany is expected to return 3.4% a year for the coming years. This is from the contribution of economic growth in local current prices: 2.89%, Dividend Yield: 5% and valuation reverse to the mean -4.45%.

This is the projected return of the stock market in Germany relative to other countries. Click on each bar in the chart to go to other countries:

You can go here to see what international stocks Gurus are buying.

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