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If there were an opposite of artificial intelligence, it might well be the German economy. While AI is credited with almost miraculous potential, sentiment toward Germany has shifted decisively into shades of black and dark grey. “Investors, however, should distinguish between headlines and substance,” says Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM. The mood in many quarters is bleak, yet data, markets, and corporate balance sheets tell a different story: Germany may be strained, but it is far from uninvestable.

For months, the public narrative has followed a familiar pattern: concerns about growth, stagnation, deindustrialisation, and relocation. Persistent pessimism dominates headlines and opinion polls alike. To many observers, the German economy appears to be in free fall—or at least on the brink. “Yet the gap between sentiment and actual investability is widening,” Fischer notes.

Neither businesses nor consumers expect spectacular economic acceleration, but there are also no signs of a downward spiral. Real GDP grew by 0.2 percent year on year in 2025—hardly a boom, but clearly not a collapse either. The most closely watched sentiment indicator, the Ifo Business Climate Index, stood at 87.6 points in December 2025, slightly below the previous month but above levels seen at the start of the year. The message is clear: sentiment remains subdued, but not desperate. The GfK consumer climate index paints a similar picture, at 26.9 points—cautious, yet stable. Prudence dominates, not capitulation.

At the same time, the German equity market is scaling new heights, with the DAX surpassing 25,000 points—following double-digit percentage gains in each of the years from 2023 to 2025. “The DAX has definitively shed its role as a barometer of domestic economic sentiment,” Fischer argues. While markets celebrate record highs, large parts of the media continue to depict a crisis landscape marked by insolvencies, layoffs, and debates over Germany as a business location. “This apparent contradiction dissolves on closer inspection,” Fischer explains. The DAX is not a mirror of the domestic economy, but a reflection of global earnings power. The bulk of its constituents’ revenues is generated outside Germany. Moreover, the index prices future cash flows and capital discipline—it is not a snapshot of the present.

Markets, therefore, are neither optimistic nor pessimistic; they are selective. They differentiate between noise and substance. Index strength does not imply broad-based prosperity, but it does signal investability where competitive advantages and cash flows remain intact.

Political inertia and bureaucracy may weigh on confidence, but they do not define corporate reality in its entirety. “Many German companies operate internationally and with considerable flexibility,” Fischer says. “They relocate production for cost reasons, not out of reflexive flight.” Firms that sell globally invest according to margins and market potential, not sentiment indicators.

Government spending programmes have provided some stabilisation. Special funds and infrastructure initiatives currently function less as growth accelerators than as anchors of stability. They help prevent a downturn without generating immediate momentum. The overall picture is one of moderate but resilient adjustment—not of disintegration. This assessment is shared by the International Monetary Fund, which recently raised its forecast for Germany’s real GDP growth in 2026 to around 1.1 percent. “That is roughly 0.2 percentage points higher than projected last autumn,” Fischer notes.

Valuations of many German equities still reflect deep scepticism. Pessimism is already priced in. For long-term investors, this can be an advantage: markets tend to exaggerate risks, while fundamentally sound companies benefit when perception gradually realigns with reality. “Sound investment strategies separate sentiment from substance,” Fischer concludes. The DAX demonstrates that investability persists even in a challenging environment. “Germany remains a demanding but predictable market—complex, in need of reform, but far from lost.” Those who look closely can still distinguish between headlines and substance.