Semiconductors Drive Markets Higher Despite Geopolitical Risks

DZ Bank has adopted a more optimistic forecast for both the U.S. stock market and the German Dax index. Analyst Birgit Henseler noted that a significant semiconductor boom is currently overshadowing geopolitical and economic disruptions.

The expert has raised the year-end forecast for the U.S. S&P 500 index from 7,300 points to 8,500 points. The German Dax is now projected to reach 27,500 points, an increase from the previous forecast of 25,000 points, representing over 13 percent potential upside.

"What is driving prices higher are semiconductors," Henseler stated, highlighting an 80 percent year-over-year growth in global chip sales for March. This surge is attributed to the expansion of Artificial Intelligence infrastructure, leading to accelerating earnings growth in the technology sector, particularly benefiting U.S. exchanges.

Large industrial companies are identified as the primary growth drivers for the Dax, supported by the technology and financial sectors. Average earnings expectations are 15 percent above the previous year, with German corporations benefiting from AI developments and a multi-billion fiscal package.

However, Henseler cautioned that the geopolitical situation remains fragile, posing a risk to equity markets. Divergent positions between the U.S. and Iran regarding the nuclear program contribute to this fragility, characterized by a constant interplay of diplomacy and incidents.

DZ Bank's primary scenario anticipates a de-escalation in the Persian Gulf, as reduced tensions are mutually beneficial. Iran has suffered collapsing foreign exchange earnings due to the blockade, while the U.S. faces pressure from energy prices and rising living costs impacting presidential approval ratings.