DeAWM: Dax will gain record levels in 2015 but markets remain volatile

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Asoka Wöhrmann, CIO at Deutsche Asset & Wealth Management (DeAWM), considers the prospects for the next 12 months. The appendix includes an at-a-glance view of our 2015 outlook, which you are welcome to use.

Foreign exchange, bonds and central bank policy

“2014 has been the year of the Greenback and dollar strength will continue in 2015. With the US at the vanguard of the international economic cycle, the Dollar will maintain its momentum. Longer term, it is heading for parity with the Euro.”

“We expect returns from sovereign bonds issued by countries with a high credit rating to increase modestly. Identifying relative value will be key. Bond investors will have opportunities to exploit regional risk premiums and currency trends. In fact, in the coming year foreign exchange will be an important component of overall returns.”

“The major international currencies are developing in quite different directions. Next year this divergence will continue to grow. Central banks are taking different approaches to economic trends in their respective markets. In the US and UK, monetary policy is likely to be reined in, while the Eurozone and Japan are more likely to continue ultra-relaxed and unconventional monetary policy. We expect the European Central Bank to provide stimulus in Europe through bond purchases. Quantitative easing has been the driver of rising equity prices, while also stimulating real estate and bond prices. This will remain the case in 2015.”

Global economy

“In 2015 the US will be the front-runner in the global economic cycle. The positive we see in Europe is that growth rates in peripheral countries is increasing. This indicates that structural reforms in the periphery are working. But in economic terms, the continent is not yet out of the woods.”

Interest rates

“2014 was dominated by low interest rates worldwide. This affected every area of financial investment. Real interest rates are negative for near-money market investments, eroding capital. This makes wealth creation and selecting the correct investment strategy even more difficult. Discussions about negative interest rates on savings accounts have highlighted the issue to investors.”


“Equities were an extremely important asset class in 2014; this will apply equally to 2015. Over the last decades Investors in the Dax gained on average seven per cent each year – though with considerable volatility. We expect returns of a similar size in 2015, which equates to a fairly typical year for equities. Stocks continue to offer return potential despite the increasing challenges.”

“Taking a 12-month view, we expect Germany’s leading index will reach 10400 points – though the overall upward trend will again be characterized by substantial volatility. A level of 11000 points and above is feasible. Bear in mind that, while in the US record corporate profits have been met with high after high on the stock exchanges, so far the DAX has made only tentative moves towards its previous highest level.”

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