Stock markets worldwide are reaching record-breaking highs. This unprecedented rally, spanning from Tokyo to New York, has seen 14 of the world's 20 largest stock markets hit all-time highs.
What Happened: The MSCI ACWI Index monitors both developed and emerging markets, and set a new record last Friday.
In the U.S., the S&P 500 and Nasdaq 100 indexes also reached new highs this week, with the Dow Jones Industrial Average surpassing the 40,000 mark for the first time. Major stock exchanges in Europe, Canada, Brazil, India, Japan and Australia are also at or near their peak levels.
Several factors have contributed to this global rally, including potential interest rate cuts, robust economies and strong corporate earnings, reported Bloomberg.
Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, told the outlet, "From a macro perspective, there are no red signals. The cyclical picture stays strong, and the rally is broadening out."
U.S. stocks have experienced a $12 trillion rally since late October, with the S&P 500 setting 24 new all-time highs in 2024. This surge is partly attributed to hopes for a robust economy with easing inflation, which could prompt the Federal Reserve to relax monetary policy later this year.
Another driving factor is the burgeoning enthusiasm for artificial intelligence technology, with companies like Nvidia Corp. (NASDAQ:NVDA), Microsoft Corp.(NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN) , Meta Platforms Inc. (NASDAQ:META) and Alphabet Inc. (NASDAQ:GOOG) accounting for about 53% of the S&P 500's rise.
European equities are also reaching record highs, propelled by positive economic data and corporate profits.
The pan-European Stoxx 600 Index has risen in five of the last six months, with the divergence in monetary policy from the U.S. likely to be a tailwind for the region's equities.
Soaring commodity prices have boosted the UK's FTSE 100 Index and Canada's S&P/TSX Composite Index to all-time highs.
Japan's Nikkei 225 has seen a 16% increase this year, while India's S&P BSE Sensex is setting records, outperforming China. Australia's S&P/ASX 200 Index also hit a high in late March.
Why It Matters: This global rally signifies a robust economic recovery from the pandemic-induced downturn.
It also underscores growing investor confidence in the global economy's strength and potential for continued growth.
The rally's broad base, spanning multiple sectors and regions, suggests a sustainable upward trend rather than a bubble.
However, investors should remain cautious as market dynamics can change rapidly due to unforeseen events or shifts in economic policy.