Examining The DAX: Past, Present And Future

China’s “Black Monday” crippled global equity markets, and Germany’s DAX index was no exception. The Frankfurt-based DAX officially entered into a bear market after plunging 4.7%, putting it 22% below its record high. The benchmark gauge demonstrated its resilience the very next day by fully recouping its losses and closing the week on a slight gain.

Despite its recent volatility, the DAX has gained around 9% compared to year-ago levels and is pacing toward a 2015 gain of more than 5%. By comparison, Wall Street’s Dow Jones Industrial Average (DIA) and S&P 500 (SPX) indices have each declined compared with year-ago levels, while China’s Shanghai Composite has plummeted more than 30% since mid-June.

With a market cap of more than €1 trillion, the DAX (try pronouncing this one: Deutscher Aktienindex) is a blue chip stock index consisting of 30 major German companies listed on the Frankfurt Stock Exchange. A quick glance at some of the blue chips makes it abundantly clear why the DAX was able to rebound so quickly from Black Monday and why it’s considered one of the world’s foremost stock gauges.

Adidas AG (ADDYY), BMW (BMWX), Daimler AG (DDAIF), Deutsche Bank AG (DB), Deutsche Lufthansa AG (DLAKY) and Volkswagen AG (VLKAY) are just some of the companies listed on the DAX.

Like other global stock indices, the DAX has experienced ups and downs throughout the years, but its long-term trajectory has been very strong. The index set multiple highs earlier this year, with its most recent being April 10 when it closed at 12,374.73.

As a major global average, the DAX is often a good indicator of the broader financial climate. The recent slowdown in China is expected to intensify in the foreseeable future unless Beijing takes more decisive measures to stimulate the economy. With that in mind, the outlook on the DAX (and by extension, the global markets) is neutral-to-negative through 2016. Although some financial analysts are predicting a massive financial crisis, many more are suggesting a hard landing for global stock markets.