The DAX is down 22.6% so far this month and 19.9% ytd. It is down 26.4% since it peaked on May 2. And this happened in the strongest economy in Europe, and maybe in the world. It hasn’t been quite as bad in the US, where the S&P 500 is down 8.9% mtd, 6.4% ytd, and 13.7% from its April 29 peak. The DAX is now near its lowest level since February 2010. The S&P 500 is still 15.1% above last year’s low on July 2. The DAX tends to be highly correlated with Germany’s IFO Business Climate Index, and suggests that the financial crisis in Europe may be depressing Germany’s economy.
Why has the S&P 500 outperformed the DAX so far this year? In 2008, the US was the epicenter of the financial crisis. This time, it is Europe. The FTSE Eurofirst 300 banks euro index is down 26.6% mtd, 31.6% ytd, and 41.1% since it peaked this year on Febuary 17. The S&P 500 Bank stock index is down 15.2% mtd, 23.2% ytd, and 28.5% since it peaked this year on February 14. Clearly, there isn’t likely to be much upside for stocks, in general, until bank stocks start to perform better, especially in Europe but also in the US. So what are top policymakers doing to avert another financial meltdown and to shore up the banks? That’s what we discuss in Monday’s Morning Briefing.