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German Chancellor Friedrich Merz’s approval rating has plunged along with economic growth expectations.

The DAX 40 Index dropped 5% since Feb. 28, as Germany, vulnerable to energy shocks, faces a likely recession.

Despite challenges, investors eye oversold stocks like SAP and Rheinmetall—both down 30%—and defense/infrastructure plays.

The Iran war kicked Germany when it was trying to get up. There might still be stocks worth buying in Europe’s top economy and across the continent.

The moderate exuberance that prevailed a year ago as Friedrich Merz ascended to the chancellorship and Berlin released its constitutional “debt brake” has given way to gloom. The closely watched Ifo Business Climate Index plunged in April to its lowest level since pandemic days. Merz’s government cut 2026 economic growth expectations in half, to 0.5%.

Merz’s political honeymoon, such as it was, is definitively over. Polls show him as “the most unpopular chancellor in 30 years,” with approval around 20%, says Jeremie Peloso, chief strategist for Europe at BCA Research. His Social Democratic coalition partners have fallen further, to an “existential edge,” notes Carsten Brzeski, global head of macro for ING Research. “The verdict on this government’s ability to push reforms is unfortunately disappointing,” he says.

No wonder the DAX 40 Index of German stocks has dropped 5% since the U.S. and Israel attacked Iran on Feb. 28, while the S&P 500 index has gained more than 3%.

Germany’s economy is one of Europe’s most vulnerable to the latest energy shock because it has shifted more slowly away from fossil fuels and depends more on power-guzzling heavy industry. “Germany and the United Kingdom are the most likely European countries to fall into recession,” Peloso says.

Berlin has one whopping advantage, though: debt to gross domestic product at about half of its large neighbors’ levels. Merz’s promised “fiscal bazooka” is already cushioning the war damage by pumping euros into infrastructure and defense. More spending could follow in extremis.

Most importantly, equity investors buy companies, not countries, especially in an export powerhouse like Germany. One big German name that looks oversold is software giant SAP, says Michael Field, European equity strategist at Morningstar. Adding wartime decline to the preceding “SaaSpocalypse,” the shares have sunk 30% this year.

Field is also high on German armaments mainstay Rheinmetall, Morningstar’s top pick in a European defense sector that has counterintuitively declined as the U.S. depletes munitions in the Persian Gulf. Rheinmetall shares are likewise off 30% from a January peak.

Sebastian Schrott, portfolio manager for European equities at T. Rowe Price, has also “added to preferred defense names” as valuations drop. His most preferred is Norwegian missile maker Kongsberg Gruppen. He bought “a bit” of Rheinmetall, as well.

Schrott is betting on Merz’s infrastructure spree through SPIE, a French-domiciled specialist in energy and communications equipment that earns the largest chunk of its revenue in Germany. While Germany lacks headline artificial-intelligence names, it is deep in suppliers to utilities that are rushing to provide power for mushrooming data centers, Peloso points out. The outstanding example is Siemens Energy, whose shares have surged fivefold over the past 18 months, vaulting the company to No. 4 in the DAX.

Investors are conducting an “interesting debate” on whether the Iran war could actually be positive for European banks, Schrott says. With continental inflation tame, the European Central Bank looked to be headed prewar toward interest rates too low for lenders to earn healthy margins. The conflict has shifted expectations to two or three increases from the current benchmark rate of 2%, says Morningstar’s Field.

Shares in German flagship Deutsche Bank have cratered 20% this year. Another one to watch, maybe.

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Tim Cook is going out with a bang. Apple reported a stellar March quarter on Thursday, delivering 17% higher revenue, thanks to 22% growth in iPhone revenues, a big change from several years of anemic growth in sales of the ubiquitous device. In other words, far more consumers are upgrading their old iPhones than has been the case for a while.

Cook, who recently announced he would step down as CEO—to be succeeded by hardware executive John Ternus—on Sept. 1, was as ebullient as ever on Thursday’s call. As is the Apple way, he and Ternus traded over-the-top compliments. Ternus described Cook as “one of the greatest business leaders of all time,” while Cook gushed, “There is no one on this planet I trust more to lead Apple into the future than John Ternus.” Even before Cook steps down, though, Apple is making some big changes.

For one thing, as Cook pointed out on an earnings call, the company increased its research and development spending 34% in the quarter, reflecting investments to take advantage of “opportunities we see in both” products and services, Cook said. Apple has never been known for its lavish R&D expenditures—as a percentage of revenues, its R&D expense has hovered around 8% in the past few years, about half that of Google parent Alphabet. With AI transforming tech and expected to usher in a new generation of devices, Apple clearly doesn’t want to be left behind.

In the same vein, Apple Chief Financial Officer Kevan Parekh revealed on an analyst call that the company was abandoning its long-standing cash management strategy of aiming to be “net cash neutral"—which means having equal amounts of cash and debt on the balance sheet. Introduced in 2018 under former CFO Luca Maestri and Cook, that philosophy underpinned consistently massive stock buybacks. Apple’s net cash—cash on the balance sheet after deducting debt—shrank to $62 billion as of March 31, from $163 billion when the target was announced in 2018.

Parekh didn’t explain the change of heart in meaningful language—preferring corporate blather—but the shift raises the prospect that Apple wants to stockpile cash more than it has been doing. While it raised its dividend and announced a new buyback program, the company cut its stock buybacks in half in the March quarter from the year-earlier period, even though free cash flow jumped 28% compared with that period. (Parekh hinted that the quarter's buyback reduction was related to the announcement of the CEO transition: Much speculated about beforehand, it possibly contributed to volatility in Apple stock.)

Why would Apple want to keep more cash on hand? It‘s possible Cook and Ternus want to be prepared for skyrocketing memory chip prices, which Cook hinted he was expecting. But stockpiling cash could position Apple well at a time its counterparts in big tech are running down their cash reserves dramatically with massive capital expenditures. Imagine what assets might come up for sale, for instance, that other companies won’t have the money to buy? Of course, Apple historically hasn’t done major acquisitions. But it’s possible the next few years will bring more radical changes to the company than might now be apparent.