European markets haven’t enjoyed the gains that American investors have gotten used to in 2013, but stocks across the Atlantic might finally be turning the corner headed into the end stretch of the year. Germany’s DAX PERFORMANCE-INDEX (INDEXDB:^DAX) picked up nearly 3% over the past five days, bringing its full-year gains to more than 9%. While Germany might be leading Europe out of recession, questions linger for this top economy — particularly as it heads into a potential turning point of its own. Is Germany still a rewarding spot for investors?
Europe turning the corner
For European investors, Germany’s upcoming political election marks a major point of uncertainty in the region’s fragile recovery. German Chancellor Angela Merkel has presided over the country’s struggling growth so far, but even as the German economy has struggled to find much traction, it has beaten out its European peers to defy contraction in the past few quarters. Indeed, Germany’s economy grew 0.7% in the year’s second quarter, one of the top rates among Europe’s largest economies.
Still, Merkel’s government isn’t so sure it can keep up that level of growth, and Berlin expects a slowdown in the third quarter. Exports, already a huge driver for the German economy, slowed down in July, with industrial production falling 1.7% from June. Overall, Germany’s Bundesbank predicts that the economy will grow 0.3% for the full year, although it’s not likely that Germany will fall into contraction in coming quarters like harder-hit nations such as Italy and Spain.
Investors have been craving signs of stable growth in this region, and Germany’s markets are the best option in Europe — particularly as the country’s economy has grown in competitiveness. Germany ranked as the World Economic Forum’s fourth most-competitive economy this year, ahead of the U.S. by one spot. If Germany can maintain that competitiveness as it recovers, it should perform solidly for investors in the future.
Still, that doesn’t mean that every stock in Germany is right for investors. Doing your homework on every company you buy into is critical in such a recession-hit region as Europe. Take Deutsche Bank AG (USA) (NYSE:DB) This top financial stock hasn’t had much of a positive impact for investors this year, with shares climbing only 2.4 year to date. Now, Deutsche Bank AG (USA) (NYSE:DB) is under investigation by Japanese regulators in a bribery probe of the company’s investment banking unit.
Regulators for Japan’s Securities and Exchange Surveillance Commission haven’t commented on the matter, and may or may not enforce sanctions, but it’s another obstacle cropping up for a financial firm that doesn’t need any more headaches.