Recently, the German federal government released a notable economic forecast, significantly lowering the 2024 economic growth projection from the previous 0.3% to -0.2%. This news immediately attracted widespread attention in the market, with many economists and analysts expressing concerns about Germany's future economic trajectory. However, surprisingly, despite the downgrade in economic growth expectations, the German stock market has shown strong growth momentum, with the DAX index soaring to new historic highs.

As the largest economy in Europe, Germany's economic growth has always been closely watched. However, multiple factors, such as geopolitical tensions, the historically low growth in global trade, and the suppressive effects of high interest rates on business investment, have caused Germany's economic recovery to lag behind expectations. German Federal Minister for Economic Affairs and Climate Action, Robert Habeck, pointed out in a statement that Germany's recovery from the crisis is slower than anticipated, and this downward revision reflects the severe challenges facing the current economy.

Despite the bleak economic growth forecast, the German stock market has shown unexpectedly strong resilience. The DAX index has repeatedly reached new all-time closing highs in recent weeks, surpassing the 20,000-point threshold. This strong upward momentum has sparked widespread attention and discussion in the market. What has driven the German stock market to soar despite the economic downturn?

Analysts suggest that the strong performance of the German stock market is largely driven by heavyweight stocks such as SAP, Siemens, and Allianz Insurance, as well as financial stocks. Although Germany's automotive industry plays a significant role in the economy, its weight in the DAX index has been significantly reduced. Instead, technology and financial companies have seen increasing weight, becoming the main drivers of the stock market’s rise. In particular, technology companies like SAP, benefiting from the widespread use of AI technologies and accelerated digital transformation, have seen substantial growth in both performance and stock prices.

Additionally, the relatively loose monetary policy in the Eurozone and Germany's ample fiscal policy have also provided important support for the stock market. The European Central Bank has announced that interest rates will remain unchanged and has hinted at continued support for economic recovery measures, creating a relatively favorable financing environment for the market. The low-interest-rate environment has reduced borrowing costs for businesses, promoting capital investment and increasing investors' risk appetite.

At the same time, the depreciation of the euro has provided certain advantages for European multinational companies. When these companies export in U.S. dollars, their revenues increase, thereby boosting their profitability and stock performance. This factor has also contributed to the rise in the German stock market.

However, despite the stellar performance of the stock market, Germany's economy still faces numerous challenges. Labor market shortages, structural issues, and geopolitical risks could all potentially hinder future economic growth. The German government needs to take effective measures to address these challenges and promote sustainable economic recovery.