Why the DAX is no longer a safe haven

Germany was the haven trade until quite recently, says Lorne Campbell of Credit Suisse but this summer sentiment shifted. Since early July, the DAX has lost around 30%; the S&P 500 barely half that figure. August's 19% slump in the DAX eclipsed even the decline seen after Lehman's collapse in October 2008.

So what's the problem? It's partly a question of the German economy slowing and the DAX being an especially cyclical, or economically sensitive, index. But the euro crisis, with many investors concerned about the strength of Germany's banks, appears to be a key issue.

The DAX is highly liquid, and so "it has been one of the indices through which investors have most easily been able to express a negative view", says Campbell. Short-selling bans in other countries have also driven nervous investors into the German market, contributing to selling pressure.

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The crisis has made the DAX historically cheap in terms of both the 2012 price/earnings (p/e) ratio and the cyclically adjusted p/e. But with Europe's debt crisis nowhere near over, the index looks likely to get even cheaper.