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German Election on Sep 24th: What to expect from the market and its impact
German Elections: Impact on the Markets.
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Following a year of dramatic elections in Europe, Germans will head to the polls on September 24th.
Although Chancellor Angela Merkel is expected to coast along to a fourth term, yet the battle for Germany’s federal election will still be decided after the dust settles.
Learn more about the possible coalitions that could shape the government after the election and the potential effects on the financial markets.
How will the German Election impact the Market?
The outcome will have repercussions for Brexit, the future of the EU and world affairs.
| Scenario | Probability | Effect | |
|---|---|---|---|
| Grand Coalition (CDU/CSU + SPD) |
Very High | The financial markets are not likely to have much of a reaction. Merkel’s continued grip on power would signal stability and a rock-solid position on the EU. The euro could get a short-term boost while gold, seen as a safe haven, is likely to fall. | |
| CDU/CSU + FDP | High | If these parties unite, the markets would be happy. The stocks of German banks and large corporations are likely to rise, along with export-oriented companies like Bayer, BMW and Siemens. | |
| CDU/CSU + Greens | Low | Auto stocks (BMW, VW, and Daimler) might suffer as the Greens would want to take action against internal combustion engines, especially in the aftermath of “Diesel gate”. German banks are likely to feel a bit insecure since the Greens want more regulation. Energy stocks, such as E.ON or RWE, might also come under pressure. |
|
| CDU/CSU + Greens + FDP |
Low | Nicknamed the ‘Jamaica’ coalition because of the parties’ combined colors, this alliance would be tricky. Given all their differing stances on big issues, negotiations would likely be long and complicated. While this would bring uncertainty to the markets, there will be some relief over Merkel remaining in charge. | |
| SDP + FDP + Greens | Low | The end of the Merkel era. The Greens would push for more environmental and financial regulations while the FDP will be pro-business. The leadership shake-up will be enough to get the stock market’s knickers in a twist. With the three parties’ conflicting agendas, it could take time for them to hash it out though. So this uncertainty could lead to some anxious hand-wringing and anxiety in the markets. | |
| SDP + Greens + Die Linke |
Very Low | With the left in power, there’s a chance of more regulations and higher taxes. This would bring a stock market meltdown. Shares would plummet, though the euro would rise alongwith gold and other safe haven investments. Export-oriented companies on the DAX index would be impacted since the Die Linke is against free trade (and the Greens to some extent as well). Bad news for companies like Bayer, BMW, Siemens and Fresenius. | |
