Germany's benchmark stockmarket index, the Dax 30, is celebrating its 30th birthday this year. The blue-chip index currently stands at around 12,500, which means it has risen tenfold over the last three decades. By contrast, the Dax's British counterpart, the FTSE 100, is up by a factor of four. Nonetheless, this isn't a fair comparison.
The Dax's return is "an illusion", says Christof Schrmann in WirtschaftsWoche. Unlike the FTSE 100, the Dax is a total return index. It measures the performance of its 30 constituent companies assuming that all dividends are reinvested. A price index such as the FTSE 100 only tracks price movements; it captures capital gains but not income.
Nor is the index a snapshot of the German economy. Many major developed markets' indices comprise big blue chips that make most of their sales abroad, but the Dax is particularly globally orientated.
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The index's fortunes reflect Germany's reliance on exports. More than 80% of the Dax constituents' sales are made beyond Germany's borders. And the exports of goods and services amount to 47.2% of Germany's GDP, according to the World Bank. This makes the index a highly geared play on global growth and especially prone to volatility as trade tensions between the US, China and the EU continue to build. Concern over the slowdown in the eurozone economy will continue to buffet it, too.
