Major equity markets around the world are experiencing record-breaking highs, reflecting a widespread surge in investor confidence. Of the world’s 20 largest stock markets, 14 have recently reached all-time highs, signaling a remarkable period of growth. The MSCI ACWI Index, tracking both developed and emerging markets, continues its upward trajectory, setting yet another record on Friday. In the United States, key indices such as the S&P 500 and Nasdaq 100 have achieved record levels this week, with the Dow Jones Industrial Average surpassing 40,000 points for the first time ever. Similarly, leading bourses in Europe, Canada, Brazil, India, Japan, and Australia are either at or near their peak levels.
This unprecedented rally is fueled by several factors, including anticipated interest rate cuts, robust economic indicators, and strong corporate earnings. Investors remain optimistic about the outlook for equities, buoyed by the abundance of liquidity in the market, with approximately $6 trillion in money market funds. Amidst this backdrop, perceived risks are minimal, contributing to the sustained momentum in global stock markets.
Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, observes that there are no significant concerns from a macroeconomic standpoint, emphasizing the strength of the cyclical outlook. The recent April pullback in global stocks proved short-lived, as investors quickly stepped in to buy the dip. This resilience is evident in the S&P 500, which has not experienced a 2% drop in 311 days, marking its longest streak since 2017-2018. Even Chinese equities, which faced challenges following a peak in February 2021, are showing signs of recovery.
Despite the dominance of technology stocks in driving market gains, particularly in the US, there is a broader-based strength across various sectors. The European equities market, for instance, has seen a surge in corporate profits, supported by positive economic data and earnings surprises. The European Central Bank’s dovish monetary policy stance contrasts with that of the Federal Reserve, providing further tailwinds for European stocks.
Commodities have also played a significant role in lifting equity markets, with soaring prices benefiting commodity-dependent indices like the UK’s FTSE 100 and Canada’s S&P/TSX Composite Index. Japan’s Nikkei 225 has seen substantial gains fueled by shareholder-friendly initiatives, a weakened yen, and policy changes in the country.
In India, the benchmark S&P BSE Sensex has set new records, outperforming its Chinese counterpart, driven by government investment pledges and a growing economy. Meanwhile, Australia’s S&P/ASX 200 Index remains near its peak, supported by positive inflation data and expectations regarding interest rates.
As global equity markets continue their upward trajectory, investors are closely monitoring developments in monetary policy, economic indicators, and geopolitical dynamics for further insights into market direction.
