Despite the many challenges the German economy has faced, investors should look at the opportunities offered by German equities, according to one asset manager.
“We believe German equities have room to continue to deliver attractive returns in 2026 and even outperform European equities,” said Vincent Mortier, Amundi group chief investment officer.
“Markets should begin to price in an improving earnings outlook, supported by fiscal stimulus and monetary easing, fading tariff risks and a more benign FX backdrop,” he added. “Industrials and financials — the largest sectors — are likely to benefit from higher defence and infrastructure spending.”
The German economy has entered a phase of structural stagnation, noted Mortier, with growth remaining weak in 2025, following two consecutive years of recession, and with industry and exports in a “crisis”.
“A large fiscal pivot — a €500bn off-budget fund and extra borrowing for defence — aims to rebalance the economy and boost demand from 2026,” said Mortier. “In the longer term, we believe that reforms could enable stronger expansion from 2027, if they are accelerated decisively.”
The shift in fiscal policy at the beginning of the year, coupled with the relaxation of the debt brake rule, is expected to boost growth in 2026, but there is debate about to what extent.
Analyses by economists differ, both within public bodies, such as the Bundesbank, the federal government, and the OECD and in the private sphere.
These analyses pit those who expect a rapid impact, via the classical Keynesian effect, against those who emphasise the importance and difficulty of overcoming structural challenges.
On this, Mortier noted: “We see this difficulty more as a temporary phenomenon rather than a general one.”
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