Corporate profits of German listed companies have recently fallen short of expectations. In 2024, earnings growth stagnated, weighed down by weak demand in China, high energy prices and geopolitical uncertainties. Analysts have revised their forecasts downwards and a significant increase in profits is not expected until 2026, but share prices are still at all-time highs.

Although the $DAX shows a plus over the year, valuation risks loom without sustainable earnings growth.

On the positive side, monetary policy is easing and interest rates are falling, which could provide a tailwind for German exports. The decisive factor will be whether margins recover from 2025 and profits increase in the long term.

The big question is therefore: is the current recovery of the DAX sufficient to sustain a sustained rally, or could disappointing earnings figures dampen sentiment in the coming years?

👉 You can find the full outlook for the DAX here in the Artikel

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The CPI US Consumer Price Index rose to 2.4% in May 2025 for the first time in four months, up from a low of 2.3% in April 2021, although it was below the expected 2.5%. On a monthly basis, the CPI rose by 0.1%, which was below both the previous month's figure of 0.2% and the expected 0.2%.

Food prices rose by 2.2% year-on-year, following an increase of 2.8% in the previous month. Energy costs fell by 3.5% year-on-year, following a fall of 3.7% in April. Energy prices fell by 1.0% on a monthly basis.

Prices for used cars and trucks rose by 1.8% year-on-year, following a rise of 1.5% in the previous month. Housing costs rose by 3.9% year-on-year, following an increase of 4.0% in April.

The annual core inflation rate, which excludes the volatile food and energy sectors, remained steady at 2.8%, the lowest level since 2021 and below the expected increase to 2.9%. The monthly core CPI also rose by 0.1%, but remained below the 0.2% in April and the expected 0.3%.

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Introduction

Every day I actually see how many points the DAX, the S&P 500 or the Dow Jones move up or down. Ultimately, however, I have never understood exactly how the points are calculated, and after coming across wild theories on the Internet such as "the DAX automatically rises by 100 points every day", I thought it was time to look into the subject.

And I would like to share my research with you in this article.

1. fundamentals

Index points are the unit of measurement used to indicate the current level of a stock market index. An index point is independent of any currency. A share index summarizes the performance of selected shares and calculates an overall value, which is then given as a number of points. The calculation method is not standardized and differs from index to index, which is why we have to note that the Dow Jones and the DAX, for example, cannot be directly compared using the number of points. So far so theoretical.

2 How is the DAX calculated?

The DAX comprises the 40 largest listed companies in Germany. It was launched in 1988 and opened at 1163.52 points. But now the calculation:

The calculation is based on the free float market capitalization, which means that only the actual freely tradable shares of a company are taken into account. In the DAX, each company is weighted according to the proportion of its free float market capitalization in relation to the total value of all companies included in the index. In order to keep volatility low, Deutsche Börse imposes a cap whereby a company may not account for more than 15% of the DAX. Changes in the proportion of a company's free float shares are only adjusted quarterly. This means that if a major shareholder buys or sells shares and the number of freely tradable shares therefore changes, the proportion is adjusted every quarter. The dividends are mathematically reinvested in the DAX and the DAX is therefore a performance index. There is no direct formula that we can apply, but in simplified terms the formula is

DAX = (price x number of shares in free float) ÷ divisor.

This divisor is determined by the German stock exchange and is there to absorb capital measures (share splits). Unfortunately, the divisor is not easily accessible to the public and is constantly being adjusted.

So unfortunately I can't calculate the DAX itself, but basically the index points represent a portfolio that invests in the 40 companies broken down by free float market capitalization (including dividends). Any theories that the DAX is subject to arbitrary measures such as "100 points per day" are therefore nonsense.

3 How is the Dow Jones calculated?

The Dow Jones Industrial Average (Dow Jones for short) is one of the oldest share indices in the world and comprises 30 large, major US companies. In contrast to the DAX, the Dow Jones is not based on market capitalization, but is price-weighted. This means that shares with a higher share price have a greater influence on the index score - regardless of the size of the company. A company with a share price of USD 300 therefore has a greater impact on the Dow Jones than a company with a share price of USD 50, even if the latter has a larger market capitalization. Dividends are not reinvested in the Dow Jones, which is why it is a price index. The formula is simplified:

Dow Jones = sum of the share prices of the 30 companies ÷ divisor

Here, too, there is a divisor that is adjusted in the event of capital measures in order to ensure the continuity of the index. Due to the way it is calculated, the Dow Jones is not as representative of the entire US market as other indices, but historically enjoys a great deal of media attention.

4 How is the S&P 500 calculated?

The S&P 500 is a much broader-based index than the Dow Jones. It comprises the 500 largest listed US companies, which are weighted according to their free float market capitalization - similar to the DAX. This makes the S&P 500 a very good reflection of the US market as a whole. The calculation is therefore based on how large the freely tradable market capitalization of a company is in relation to the total value of all companies included in the index. Companies with a larger market capitalization (such as Apple, Microsoft or Amazon) have a greater influence on the index movement. There is no cap on the S&P 500 and the 5 largest companies already make up 20-25% of the entire index. The S&P 500 is a price index, which means that dividends are not reinvested. The simplified formula is

S&P 500 = (sum of weighted market capitalizations) ÷ divisor

A divisor is also used here to neutralize capital measures. Analysts and fund managers consider the S&P 500 to be one of the most important and informative indices worldwide, as it covers a wide range of sectors and company sizes.

Even though I am unfortunately unable to calculate the individual indices myself, as the divisor literally throws a spanner in the works, I have still learned a few new things and hope that you have been able to share in them...

HG Small investor

PS: If you have a few points left on getquin, I'd be delighted too...

Sources

https://www.boerse.de/grundlagen/index-grundlagen/Berechnung-von-Indizes

https://www.hsbc-zertifikate.de/dam/jcr:b9b5c32f-ad2d-407a-ae4f-208d9e5ef394/202406_so_wird_der_dax_berechnet.pdf

https://www.flatex.de/boersenwissen/aktien-und-indizes/dow-jones/

https://www.sparkasse.de/pk/ratgeber/finanzglossar/dax.html

https://www.hermoney.de/boerse-geldanlage/etf/indizes-berechnung/

https://de.m.wikipedia.org/wiki/DAX

https://www.deutsche-boerse.com/dbg-de/media/news-stories/explainers/DAX-Index-Benchmark-und-Barometer-f-r-die-deutsche-Wirtschaft-148654

And some more... (Just ask me for specific sources)

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Which positions should I continue to build or sell, the crypto positions were blind buys without having a clue. My "plan" would be to use savings plans to increase my position in $IWDA (-3,61 %)
$DAX and $MEUD (-1,67 %) with savings plans. Is it a good idea to delete TR and give the portfolio time? I'm only 4 months in and still learning every day. Would appreciate any answers.

The stock market will react positively to the election result $DAX

After prolonged tensions and disagreements over the economic policy course, particularly with regard to the debt brake and investmentsChancellor Olaf Scholz effectively ended the traffic light coalition on November 6, 2024 with the dismissal of Finance Minister Christian Lindner (FDP) ended. The FDP then withdrew from the government and left the previous coalition with the Greens and the SPD broke up. Scholz sharply criticized Lindner's financial policy and accused him of using one-sided austerity policy the urgently needed modernization and promotion of growth in Germany.

In order to clarify the situation and "secure" the confidence of the Bundestag Scholz held a vote of confidence for January 15, 2025 has been announced. Should he lose this, the path for new elections would already be open end of March 2025 would be free. The CDU/CSU however, are calling for a quicker vote and are banking on new elections as early as January. Until the new elections, Scholz would form a minority government with the Greens would lead.

The upcoming new elections could lead to a clear change of direction in Germany. Currently, the CDU/CSU dominate the opinion polls with around 32%. Voters who are disappointed with the previous traffic light coalition could now switch to a more conservative, more business-friendly program program. It is assumed that the election campaign topics will primarily focus on economic policy issues. At a time when Germany is struggling with weak economic growth, investment laziness and infrastructural challenges issues surrounding the debt brakefinancing public investment and ways to revive the economy could play a central role.

The political instability could short-term put pressure on the DAX $DAX under pressure in the short term. The index recently reached 19,275 points, a record high. Especially the sectors automotive industry ($VOW3 (-2,24 %) | $MBG (-1 %) | $BMW (-2,64 %) ), the energy sector ($RWE (-0,57 %) | $EOAN (-0,71 %) ) and infrastructure companies could be affected by increased volatility due to their dependence on government increased volatility but this would also be limited.

At the heart of the crisis is the question of whether the debt brake can be relaxed in order to allow urgently needed investments in infrastructure, education and digitalization financing. The possibility of a new government pursuing a looser fiscal policy could have a positive effect on the German economy and remove barriers to investment. reduce barriers to investment reduce barriers to investment.

A clear economic policy signal after the new elections could boost the confidence of investors and the long-term growth prospects of Germany. Election campaign topics such as structural reforms, improvement the competitiveness and investments in a sustainable infrastructure could lead Germany into a phase of sustainable growth.

Unfortunately, the political crisis comes at a time of geopolitical change, particularly with Donald Trump's return to the White House. Germany's role on the international stage, especially in transatlantic transatlantic relations and in trade issuescould be influenced by this realignment. The possibility of punitive tariffs or changes in US policy could economic policy decisions and investment decisions German companies even more difficult.

Share of companies in the development of the DAX

34.8% SAP $SAP (-3,86 %)

13.1% Allianz $ALV (-0,68 %)

10.9% Munich RE $MUV2 (-0,74 %)$MURGY (+0,9 %)

10.2% Deutsche Telekom $DTE (+0,17 %)

7.3% Rheinmetall $RHM (-2,26 %)

5.2% Siemens Energy $ENR (-3,54 %)

5.1% Adidas $ADS (-2,82 %)

3.6% Deutsche Bank $DBK (-2,47 %)

9.8% remaining 32 shares together

>> Which ones are you invested in?

Source: HQ Trust Research, as of August 2024

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DAX breaks 19,000 points for the first time today. New all-time high. +21% in 12 months. 🇩🇪📈💶👑🏆🥇 #dax
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