Cyclical stocks and software could benefit from increased German fiscal expansion if the Iran conflict continues to disrupt government spending plans, according to analysts at Deutsche Bank. They noted on Tuesday that cyclicals – companies that tend to move in the same direction as the wider economy –have sold off indiscriminately over the previous six trading days, while software companies have “bottomed out” as fears that AI will disrupt traditional business models subside. Both are opportunities, the analysts said. They said in a note that, until the Iran conflict began, “AI disruption caused the European software sector to fall by 23% and US software to fall by 19% over the past six months.” The analysts added that these companies are now trading at historically low premiums versus the market, with current valuations implying that “consensus believes that software companies will no longer outgrow the broader index.” As a result, Deutsche has upgraded tech from underweight to neutral and software within that bracket to overweight. Among cyclicals, they highlighted 10 stocks to ride the stimulus wave, including Commerzbank, Siemens Energy, and Volkswagen, which published its full-year earnings update on Tuesday morning. Shares in the German carmaker rose by 2% on Tuesday after it reported a 53% year-on-year drop in operating profit in 2025. The company attributed the decline to Trump’s tariff regime, as well as currency fluctuations and costs associated with adjusting its Porsche product strategy. That meant its operating profit of 8.9 billion euros ($10.4 billion) came in well below analyst expectations, according to LSEG consensus data. “The last year was really challenging indeed,” Arno Antlitz, Volkswagen’s chief operating officer and chief financial officer, told CNBC’s Annette Weisbach on Tuesday.
