Stock Market at the Brink of Christmas: A Recap
Trump advocates for a specific designation
As the Christmas bells ring near, the stock market is quietly humming. The previous day did not see major price fluctuations, a welcomed break from the norm. The German benchmark index settled at 19,849 points, having only dipped 0.2%. Despite the Federal Reserve's cautious interest rate forecasts causing a loss spree earlier in the pre-Christmas week, this slight recovery can be interpreted as a sign of stabilization. However, the coveted 20,000 points continues to elude the Dax for the time being. In fact, the stock market barometer has almost completely erased the gains from the previous year-end rally. Nevertheless, a total gain of over 18% since the beginning of the year remains encouraging.
Individual stocks have shown mixed performances. For instance, Volkswagen shares experienced a setback after reaching an agreement in the wage dispute. Initially, the shares surged, but they then slid back and closed with a loss of over 2%. Volkswagen plans to cut more than 35,000 jobs by 2030, aiming to save the company 1.5 billion euros annually. In exchange, they have promised employment security until 2030. The initial plan didn't include any plant closures, but analysts have raised concerns about the timeliness and sufficiency of the proposed profits under the current challenging automotive industry conditions.
On the other hand, the inauguration of President Trump cast a favorable shadow on Rheinmetall shares. NATO Secretary-General Mark Rutte anticipates increased pressure from the U.S. administration in terms of defense spending by European NATO countries such as Germany. The likelihood of increased military spending by Western NATO countries has made Rheinmetall one of the biggest gainers in the Dax. In the MDax, Hensoldt was another significant benefit.
Capping off the week on a positive note, Borussia Dortmund shares showed a gain in the SDax. The BVB's away win in the last Bundesliga game of the year in Wolfsburg served as a conciliatory end to the year. The BVB currently sits within reach of the Champions League places, with 25 points and 6th place in the table.
An upswing was also observed in Copenhagen for Novo Nordisk shares. The shares rebounded, temporarily gaining over 9% after the intense plummet of 20% on Friday following Denmark's announcement of a setback in the development of the next generation of its weight loss injection. While the drug CagriSema showed a significant weight loss of 22.7% in a crucial Phase 3 clinical trial in obese patients, the company had been expecting up to 25%.
Insights: Impact of US Presidency on Rheinmetall Stock and Increased Military Spending by NATO Countries
Rheinmetall, Germany's largest arms manufacturer, has experienced significant fluctuations in its stock performance due to geopolitical events, particularly those involving the U.S. presidency and NATO's military spending dynamics. The presidency, under Donald Trump, has played a significant role in altering the geopolitical landscape, which has ultimately benefited Rheinmetall and other European defense stocks.
The Russian invasion of Ukraine in 2022 triggered increased military spending by NATO countries, including Germany. As a result, Rheinmetall's stock has seen a substantial growth, with a surge of over 1600%[5]. The company's sales increased by 46% year-over-year to €2.3 billion in the first quarter of 2025, driven by a 73% increase in its defense business[3].
The theme of increased defense spending has been reflected in the performance of the Themes Transatlantic Defense ETF, which includes Rheinmetall. This ETF has shown significant outperformance relative to broader market indices like the S&P 500, underscoring the broader trend of increased defense spending[2].
However, investors must consider both the company's strong fundamentals and its valuation. While the growth has been impressive, valuation concerns exist, as the stock's performance has been quite bullish[5].
[1] Federal Reserve Interest Rate Forecasts (Source: Federal Reserve)[2] Themes Transatlantic Defense ETF (Source: Themes Transatlantic Defense ETF)[3] Rheinmetall's Financial Performance (Source: Rheinmetall AG)[4] Germany's Historic Debt Reform (Source: German Federal Government)[5] Impact of the U.S. Presidency on Rheinmetall (Source: Financial Times)
In the context of financial markets, the presidency of Donald Trump has significantly influenced the stock performance of Germany's largest arms manufacturer, Rheinmetall, by altering the geopolitical landscape, particularly through increased military spending by NATO countries. This trend is also reflected in the outperformance of the Themes Transatlantic Defense ETF, an ETF that includes Rheinmetall.
The Russian invasion of Ukraine in 2022 and subsequent increased military spending by NATO countries, including Germany, resulted in a surge of over 1600% for Rheinmetall's stock and a 46% year-over-year increase in sales, predominantly in its defense business. However, investors must consider both the company's strong fundamentals and its valuation, as the stock's performance has been quite bullish.
