Stock market: The world index is catching up again

Its reputation has suffered somewhat. The MSCI World was considered the ultimate investment tool—the entire equity world in a single index. Accordingly, relevant ETFs fill the portfolios of small investors. This proved successful until Donald Trump became US president again. After a brief period of enthusiasm, the US stock markets slumped, and a weakness of the MSCI World became apparent, which had previously been its greatest strength: Its extreme US bias.

Meanwhile, investors were looking forward to the price-boosting effect of government spending programs in Germany, and at the turn of the year a rarely seen picture emerged: the otherwise rather sedate DAX left US colleagues like the S&P 500 far behind – and thus also the MSCI World.

But nothing lasts forever, and anyone who cursed their "world index" ETF in the first half of the year can now take another look. In recent weeks, stocks in the US have gained momentum, while the DAX has been oscillating indecisively through the summer.

Since the beginning of the year, the German index, with a gain of around 20 percent, is far ahead of the S&P 500 (around 10 percent) and the MSCI World (around 13 percent). However, since the beginning of July, the others have been staging a comeback: the US market and the global index are up around 4 percent, while the DAX has achieved half that.

It's no coincidence that this happens during the reporting season. While positive surprises predominate in the US, many forecasts in Europe are being revised downwards. And after the rally, the DAX is no longer considered "cheap" – minor disappointments are enough. Orders are being delayed at the defense company Rheinmetall, for example, and premiums are falling at the insurers Munich Re and Hannover Re. No surprises, but three losers these days.

Now everyone is waiting to see which way the DAX will break out of its summer routine and whether the US market has regained its former strength – or is experiencing an economic slowdown. Either way, if you want to be on both sides, the MSCI World isn't enough.

Stefan Winter is the senior business editor at RND. He writes weekly about the stock market, financial markets, the rise and fall of share prices—and the companies behind them.