Winners and Losers of the German Election

Winners and Losers of the German Election

29 September 2021

With 25.7% of the vote in Sunday's elections, Olaf Scholz and the German Social Democrats defeated Armin Laschet - Angela Merkel's successor - and his CDU, which received 24.1%, the party's worst election result to date. But Mr Laschet has not given up hope of becoming Germany's next chancellor. The next few weeks will be marked by intense negotiations, with both parties doing their utmost to form a stable coalition government. Investors should therefore in the coming weeks (or possibly months) keep an eye on where the business-friendly FDP, the green "Grüne" and the socialist "Die Linke" will fit into this constellation.

Sunday's election results

The commotion on the Frankfurt stock exchange in recent weeks may be partly attributable to a possible coalition government between the SPD, the Greens and Die Linke. A coalition between the three parties would be a clear shift to the left, and a clear farewell to Merkel's 16-year right/centre rule. However, with the SPD at 25.7%, the Greens at 14.8%, and Die Linke at 4.9%, a left-wing coalition has become a practical impossibility. What impact this will have on the capital markets remains to be seen. A repeat of a “grand coalition” between the SPD and CDU, although mathematically possible, has been more or less dismissed by both parties. A viable coalition government will thus most likely require the support of three parties. 

Source: Politico.eu 29.09.2021

One possible constellation is that of the SPD, the Greens, and the FDP, but this option requires that the FDP, with its focus on market liberalism, and the Greens, who are at the forefront of the transition to a fossil-free economy, manage to find a common agenda. Over the next few days, the FDP and the Greens will be discussing in small groups to see if there is a basis for possible cooperation.

Possible winners and losers

Whatever the form that the German government takes, there is still broad support for a transition to an economy less dependent on fossil fuels. The target of a 65% reduction in CO2 emissions by 2030 remains. Thus, companies active in the fossil fuel phase-out may benefit. In addition to support for the fossil fuel phase-out, all parties from Die Linke to the CDU more or less agree that major investments in railways, EV charging stations, internet infrastructure and public transport will be needed to ensure the competitiveness of German industry. Increased investment in these sectors could have a positive impact on companies operating in these areas. Possible losers could be the aerospace and automotive industries. A red-green government, possibly with higher tax rates and minimum wage, as well as more ambitious climate targets, could become a headwind for the German automotive industry. Although the polls closed on Sunday, investors should keep an eye on developments in German politics over the next few weeks.

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This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance.

30/11/2021 23:17:55

 

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