AfD victory adds political risk premium as DAX edges lower

AfD victory adds political risk premium as DAX edges lower

Germany's far-right Alternative for Germany (AfD) has delivered a historic election victory in Saxony-Anhalt, winning around 44% of the vote and emerging as the largest political force in the eastern German state. The result marks the party's strongest performance in its history and puts further pressure on Chancellor Friedrich Merz and his governing coalition.

The scale of the AfD's success was driven not simply by voters switching allegiance, but by a dramatic increase in participation. Turnout surged from 60.3% at the previous election to around 76.5%, and much of that additional mobilisation benefited the AfD. Rather than previously disengaged voters returning to strengthen Germany's political centre, many appear to have returned to express their frustration with the established parties and punish the political mainstream.

The AfD secured 39 of the 83 seats in the state parliament, falling just three short of an outright majority. The CDU, meanwhile, suffered a dramatic setback, taking only 17.2% of the vote compared with 37.1% in the previous election. Despite the AfD's commanding position, its ability to form a government remains uncertain because Germany's mainstream parties continue to maintain a political "firewall" against working with the party.

The result nevertheless carries significance well beyond Saxony-Anhalt. It provides the clearest indication yet of the AfD's growing electoral momentum in eastern Germany and represents a fresh challenge to Merz, whose government has struggled with weak public support. The party has campaigned heavily on immigration, crime and dissatisfaction with the established political parties, while also taking a more Russia-friendly stance on foreign policy.

AfD result in context

Sunday’s election result has to be seen in context, since Saxony-Anhalt is one of Germany’s 16 states with around 2.14 million inhabitants, thus only making up slightly over 2.5% of the country’s 83.5 million population.

Having said that the AfD has gone from a fringe force to a major player in German politics, steadily building support on the back of voter frustration over immigration, the economy and dissatisfaction with the established parties.

Its breakthrough came in the 2025 federal election, when it more than doubled its 2021 vote share to 20.8%, becoming the largest opposition party, before continuing to strengthen its position in eastern Germany. That momentum culminated this weekend in Saxony-Anhalt, where the AfD secured around 44% of the vote — more than double its 2021 result and its strongest performance in a German election to date — bringing the party closer than ever to actually governing at state level.

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How markets have responded to the AfD result

That political uncertainty has been reflected, albeit modestly, in financial markets. The DAX 40 was trading around 0.25% lower on Monday - a day on which US markets were shut for Labor day - with the AfD victory cited as one factor behind the weakness. However, the market reaction has been relatively contained, suggesting investors are not yet treating the election as a major threat to Germany's economic or corporate outlook.

DAX 40 daily candlestick chart

Indeed, other forces are currently exerting greater influence on European equities. Rising oil prices following renewed US-Iran attacks are adding to inflation concerns and reinforcing expectations that the European Central Bank could raise interest rates on Thursday. The broader STOXX 600 was also slightly lower, while energy stocks benefited from the jump in crude prices.

For the DAX, the key issue is therefore whether the AfD's success remains primarily a political story or starts to translate into concerns over Germany's ability to implement economic reforms. A more fragmented political landscape could make it harder for Merz's government to push through measures aimed at reviving Europe's largest economy, particularly if the AfD continues to gain support in upcoming regional elections.

What the AfD result means for the DAX outlook

For now, however, the market response looks more like a political risk warning than a full-blown risk-off move. The DAX's relatively small decline suggests investors are taking note of the AfD's breakthrough without yet pricing in a material deterioration in Germany's economic or corporate outlook.

The bigger test will come if the result strengthens the AfD nationally and begins to undermine confidence in Merz's ability to govern. With further regional elections ahead, Sunday's result could prove less important for what it immediately does to German equities than for what it says about Germany's increasingly fragmented political landscape.

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How to trade the DAX

1. Do your research on the AfD election result, the German political landscape and the macro factors currently driving the DAX
2. Decide whether you want to trade via spread betting or CFD trading 
3. Open a trading account with us
4. Search for the DAX 40 in our trading platform 
5. Place your trade