From Morningstar: 2025-02-24 08:08:47

European equities remained stable on Monday following Germany’s parliamentary elections, which resulted in a centrist coalition between conservatives and Social Democrats. Risky scenarios were averted as far-right and pro-business parties did not gain significant traction. The new government is expected to focus on lowering energy prices and improving infrastructure, potentially boosting equities.

Defense sector stocks, including Rheinmetall and Hensoldt, saw gains as the likely new chancellor committed to increased defense spending and support for Ukraine. With a potential coalition partner also in favor of higher defense budgets, aerospace and defense companies across Europe experienced positive movement. This shift could lead to a higher GDP target for German defense spending.

Mid-cap equities outperformed blue-chip stocks on Monday, benefitting from the anticipated business-friendly policies of the incoming government. The MDAX index of mid-cap stocks saw a significant rise compared to large-cap and small-cap indices. Companies with operations primarily in Germany are expected to benefit from the domestic policy focus.

The future of Germany’s ‘debt brake’ is uncertain following the election, as populist parties make up a significant portion of parliament and are unlikely to support increased defense spending. The Euro initially rose post-election but stabilized, while German bond yields remained neutral. Alternative pathways to increased spending may include an annual emergency clause renewal and a specialized fund for specific needs. 1. The stock market hit record highs today, with the S&P 500 reaching 4,500 points for the first time. This is attributed to strong corporate earnings and positive economic data, signaling a robust recovery from the pandemic.

2. The latest unemployment report shows a decrease in jobless claims, with only 350,000 new claims filed last week. This is the lowest number since the start of the pandemic, indicating a strengthening job market and economic recovery.

3. In international news, tensions are rising between China and the US over Taiwan, as China ramps up military exercises near the island. The US has expressed concern over China’s aggressive actions, raising fears of a potential conflict in the region.

4. The housing market continues to boom, with home prices hitting a new record high in July. The median price for existing homes rose to $359,900, a 17.8% increase from last year. Low mortgage rates and high demand are driving the surge in prices.

5. In tech news, Apple announced the release of the new iPhone 13, featuring improved cameras, longer battery life, and a more powerful processor. The iPhone 13 is set to be released in September, with pre-orders starting next week. Analysts predict strong sales for the new device.



Read more at Morningstar: Midcaps and Defense Stocks Rally on Conservative…