From New York to London to Tokyo, if there’s a similarity between world stock markets it’s this: record highs.
Of the world’s 20 largest stock markets, 14 have recently hit record highs. The MSCI ACWI index, which tracks developed and emerging markets, has been on a record run and hit another high on Friday. In the United States, the S&P 500 and Nasdaq 100 hit record highs this week, and the Dow Jones Industrial Average topped 40,000 points for the first time ever. Meanwhile, the largest exchanges in Europe, Canada, Brazil, India, Japan and Australia are currently at or near their peak.
Looming interest rate cuts, a healthy economy and corporate earnings are driving the activity. What’s more, there are many underlying drivers that could keep stocks rising, such as money market funds holding $6 trillion, while the risk remains minimal.
“From a macro perspective, there are no red flags,” said Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, which is overweight in his multi-asset portfolio. Global stocks. “The cyclical picture remains strong and the rally is expanding.”
The April pullback in global stock markets did not last long, with bargain hunters emerging. That helps explain why the S&P 500 hasn’t fallen 2% in 311 days, its longest losing streak since 2017-2018. Even China’s stock market, which has been struggling since hitting highs in February 2021, is starting to recover.
With all of this in mind, here’s the current state of the world’s major stock markets:
$12 trillion rebound
The S&P 500 hit 24 new highs in 2024 after two years without a new all-time high, while U.S. stocks have gained $12 trillion since the end of October. One is the hope for a soft landing while inflation cools while the economy remains strong, prompting bets that the Federal Reserve will ease monetary policy as early as later this year.
Another part is the passion for artificial intelligence technology. Artificial intelligence chip giant Nvidia Corp. itself contributed about a quarter of the S&P 500’s gains. . and Google parent Alphabet Inc., which accounted for about 53% of the benchmark’s gains, came from just five stocks.
Dave Mazza, chief executive of Roundhill Investments, said the Dow’s new milestone this week may be a more important development because it has reduced its weighting of large technology giants.
“While the strength of the technology sector has been critical in helping the market reach new highs, it is far from the only sector performing well,” he said. “While some last year pointed out that the market was too concentrated, the same cannot be said in 2024.”
European profit surprise
European stocks also hit record highs as economic data this year showed signs of bottoming out. This has boosted corporate profits and fueled expectations that the market will continue to rise.
“An expected weak earnings season turned out to be better than expected,” said BNP Paribas strategists led by Georges Debbas, noting that three-quarters of European companies met or exceeded earnings estimates, with margins it has been improved. That boosted analysts’ expectations for future profits, pushing stocks higher.
The pan-European STOXX 600 index has risen in five of the past six months, with divergence from U.S. monetary policy likely to be a driver for the region’s stocks. The ECB has struck a more dovish tone than the Federal Reserve over the past few months, with bond markets expecting the ECB to cut interest rates before the U.S. central bank for the first time.
While the gains have been concentrated in a handful of stocks, they have been broadening since February, with 16 stocks accounting for 50% of the Stoxx 600’s annual gain. ) is the largest, accounting for 10% of the Stoxx 600’s annual gain.
Commodities boost inventories
Britain’s FTSE 100 has outperformed Europe’s Stoxx 50 in dollar terms over the past three months, recovering mostly from its poor performance at the start of the year. Soaring commodity prices are a key driver, helping one of the world’s cheapest developed equity markets start to catch up with rivals.
The economically sensitive commodities sector also pushed Canada’s main equity benchmark, the S&P/TSX Composite Index, to a record high. Gold and copper have hit records this year, boosting the country’s massive mining industry, which accounts for more than 12% of the index’s weight.
“Precious metals prices are approaching the decade-highs set just weeks ago,” Bloomberg Intelligence analysts Gillian Wolff and Gina Martin Adams wrote in a note. , which could temporarily support the Canadian index, although a reversal could spell trouble.
Japan is back
Japan’s Nikkei 225 Index is up 16% this year and 28% last year. The country’s move to boost shareholder returns, a weakening yen and the end of Japan’s negative interest rates have attracted investors and driven stocks higher.
BlackRock strategists said a weaker yen could deter foreign investors. But they also believe long-term prospects are good thanks to corporate reforms, domestic investment and wage growth.
India also performed strongly, with the benchmark S&P BSE Sensex hitting a record and overtaking China, thanks to government investment commitments and an expanding economy. However, investors have grown cautious in recent weeks amid election uncertainty and high valuations.
Meanwhile, Australia’s S&P/ASX 200 index hit a new high on March 28 after inflation data bolstered bets that interest rates had peaked. Expectations have since changed, with one former central bank official predicting a rate cut may not come until the end of 2025.
