From Tokyo to New York, stock markets are on a record-hitting spree around the world
With fewer obstacles in sight, rally looks set to keep rolling
From New York to London to Tokyo, if there's one similarity among the world'sÌýequity marketsÌýit's this: record highs.
Of the world's 20 largest stock markets, 14 have hit all-time highs recently. TheÌýMSCI ACWI Index, which tracks developed and emerging markets, has been on a record-breaking run, setting another new high on Friday. In the US, theÌýS&P 500ÌýandÌýNasdaq 100Ìýindexes hit records this week, while theÌýDow Jones Industrial AverageÌýcrossed 40,000 for the first time ever. Meanwhile, the biggest bourses inÌýEurope,ÌýCanada,ÌýBrazil,ÌýIndia,ÌýJapanÌýandÌýAustraliaÌýare currently at or near their peaks.
LoomingÌýinterest rate cuts, healthy economies andÌýcorporate earningsÌýare driving the activity. And what's more, there are plenty of potential drivers to keep the rally rolling, such as the $6 trillion sitting inÌýmoney market funds, while risks remain scarce.
"From a macro perspective, there are no red signals," saidÌýSalman Ahmed, global head of macro and strategic asset allocation at Fidelity International, who's overweight global equities in his multi-asset portfolios. "The cyclical picture is staying strong, and the rally is broadening out."
TheÌýApril pullbackÌýin global stocks didn't last long, as dip buyers consistently showed up. That helps explain why the S&P 500 hasn't seen a 2% drop in 311 days, its longest streak since 2017-2018. And evenÌýChinese equities, which have been struggling since hitting a high in February 2021, are starting to come back.
With all that in mind, here's the state of play in major equity markets around the world:
$12 Trillion Rally
The S&P 500 has set 24 new all-time highs in 2024 after going two years without one, as US stocks have been on a $12 trillion rally since late October. One part of that is hopes for a soft landing with the economy staying strong while inflation cools, which is spurring bets theÌýFederal ReserveÌýwill ease monetary policy as soon as later this year.
Another part is enthusiasm for artificial intelligence technology. AI chip giantÌýÌýon its own is responsible for about one-fourth of the gains in S&P 500. And together withÌýMicrosoft Corp.,ÌýAmazon.com Inc.,ÌýMeta Platforms Inc.Ìýand Google-parentÌýAlphabet Inc., roughly 53% of the benchmark's rise is coming from just five stocks.
So perhaps the Dow's new milestone this week was the more significant development, since it's less heavily weighted toward those big tech behemoths, according toÌýDave Mazza, chief executive officer of Roundhill Investments.
"While the tech sector's strength has been incredibly important to helping markets make high after high, it's far from the only sector that's doing well," he said. "While some were pointing to the market being too concentrated last year, you can't say the same in 2024."
Europe's Earnings Surprise
European equities are also on a record-hitting spree as economic data shows signs of bottoming amid positive surprises this year. That's fueling corporate profits and driving expectations for markets to keep building on the rally.
"The expected sluggish earnings season turned out to be better than feared," BNP Paribas strategists led byÌýGeorges DebbasÌýsaid, noting that three-quarters of European companies met or exceeded earnings expectations, with margins improving. That's fueling analyst estimates for future profits, lifting stocks higher.
The pan-European Stoxx 600 Index has risen inÌýfive of the last six months, with the divergence in monetary policy from the US likely to be a tailwind for the region's equities. The European Central Bank has struck a more dovish tone than the Fed over the past few months, and bond markets are expecting the ECB to cut rates before its US counterpart for the first time ever.
While the rally had been heavily concentrated in a handful of stocks, it's been broadening out since February, with 16 stocks contributing 50% of the yearly gains in the Stoxx 600.ÌýNovo Nordisk A/SÌýis the largest, making up 10% of the gauge's returns this year, whileÌýASML Holding NVÌýandÌýSAP SEÌýaccount for 7.7% and 4.3%, respectively.
Commodities Lift Stocks
The UK'sÌýFTSE 100 IndexÌýhas beaten theÌýEuro Stoxx 50Ìýin dollar terms over the past three months, recovering much of its underperformance from the beginning of the year. Soaring commodity prices have been a key driver, helping one of the cheapest developed equity markets in the world start to catch up to its rivals.
The economically sensitive commodities sector has also pushed to Canada's main stocks benchmark, theÌýS&P/TSX Composite Index, to an all-time high. Gold and copper have repeatedly set records this year, giving a boost to the country's massive mining sector, which accounts for over 12% of the index's weighting.
"Precious metal prices are closing in on decade highs set just a few weeks ago, which could keep the Canadian index supported for now, though a reversal could spell trouble," Bloomberg Intelligence analystsÌýGillian WolffÌýandÌýGina Martin AdamsÌýwrote in a note.
Japan Is Back
Japan's Nikkei 225 is upÌý16% this year, adding to aÌý28% gain last year. The country lured investors and drove gains with a campaign to improve shareholder returns, aÌýweak yenÌýand the end of negative rates in Japan.
BlackRock Inc. strategists said the sliding yen could put off foreign investors. But they also think the outlook is good over the long-term due to corporate reforms, domestic investments and wage growth.
India also has been on a strong run, with the benchmarkÌýS&P BSE SensexÌýsetting records and outperforming China, thanks to the government's investment pledges and an expanding economy. However, investors turnedÌýcautiousÌýin recent weeks over election uncertainties and high valuations.
Meanwhile, Australia'sÌýS&P/ASX 200 IndexÌýhit a high on March 28 after inflation data bolstered bets that rates have peaked. Since then, expectations have shifted with a former central bank official predicting that cuts may only come in late 2025. Yet, Australian stocks are back to hovering near that record high.
¶Ù¾±²õ³¦±ô²¹¾±³¾±ð°ù:ÌýThis article first appeared on Bloomberg, and is published by special syndication arrangement.
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