Das is a goot time to keep an eye on EWG

Key points

• The German stock market has been treading water for seventeen years (albeit in an extensive range)
• The late March through April period has tended to witness favorable results
• Ticker EWG has been trending well in recent months
• The combination of favorable seasonality and price action may offer an opportunity for short-term traders

German stock market has been "dead money" for 17 years

The chart below tells you everything you need to know regarding the German stock market as a long-term investment. The iShares MSCI Germany ETF (ticker EWG) is literally unchanged in price from its level 17 years ago. In fact, as of a month ago, it was trading at the same price as it was in February 2000.

Several policy decisions by the German government have purportedly hamstrung long-term economic growth. However, analyzing geopolitics and their implications is not our strong suit. Our goal is to find and exploit potential opportunities regarding the German stock market.

The chart below shows that since the October low in 2022 and the October low in 2024, ticker EWG has been on the upswing. 

Can this advance continue? The annual seasonal trend for EWG shown below suggests the answer may be "Yes, and soon."

A look back at late March through April

The chart above highlights the period that extends from the close on Trading Day of the Year (TDY) #56 through TDY #83. For 2024, this period extends from the close on 2024-03-21 through 2024-04-30.

The chart below displays the hypothetical growth of $1 invested in ticker EWG only during this period every year EWG started trading in 1996.

The table below summarizes historical EWG performance during this period.

Historical seasonal results skew to the favorable side, with 3 out of 4 years showing a gain during the TDY #56 to #83 period. Likewise, regarding moves greater than 10% or more during this period, favor the winning side by 7 to 1. Conversely, the worst TDY #56 to #83 decline for EWG was -11.5% in 2000, and the second worst loss was -7.8% in 2022.

What the research tells us…

The good news is that the German stock market is already in an established uptrend as a favorable seasonal period approaches. This is the preferred setup for exploiting any seasonal trend (i.e., price is "doing what it is supposed to be doing.") That said, no seasonal pattern is guaranteed to follow its historical norm. 

Based on these results, momentum traders should be looking for an opportunity in ticker EWG between now and the end of April. Nevertheless, this trend is not a sure thing, so each trader must make decisions regarding capital allocation and risk management.