From New York to London to Tokyo, if there’s one thing the world’s stock markets have in common, it’s all-time highs.
Of the world’s 20 largest stock markets, 14 recently reached all-time highs. The MSCI ACWI index, which tracks developed and emerging markets, achieved a record gain, setting another new high on Friday. In the US, the S&P 500 and Nasdaq 100 indices hit records this week, and the Dow Jones Industrial Average crossed the 40,000 mark for the first time in history. Meanwhile, the largest exchanges in Europe, Canada, Brazil, India, Japan and Australia are currently at or near their peak.
Impending interest rate cuts, a healthy economy and corporate earnings are driving this activity. What’s more, there are plenty of potential factors supporting the rally’s continuation, such as the $6 trillion sitting in money market funds while risks remain meager.
“From a macro perspective, there are no red flags,” said Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, who has global equities dominated in his multi-asset portfolios. “The cyclical picture remains strong and the rally is expanding.”
The April pullback in global stock markets did not last long, as buyers constantly appeared on the decline. That helps explain why the S&P 500 hasn’t fallen 2% in 311 days, its longest streak since 2017-2018. And even Chinese stocks, which have struggled since peaking in February 2021, are starting to recover.
With all this in mind, here is the state of affairs in the major stock markets around the world:
$12 Trillion Rally
The S&P 500 set 24 new all-time highs in 2024 after two years without one, as U.S. stocks have risen $12 trillion since the end of October. One reason for this is hopes for a soft landing in which the economy remains strong while inflation cools, fueling bets that the Federal Reserve will ease monetary policy as soon as this year.
The other part is the enthusiasm for artificial intelligence technologies. AI chip giant Nvidia Corp. accounts for about a quarter of the profit of the S&P 500 index. And together with Microsoft Corp., Amazon.com Inc., Meta Platforms Inc. and Google parent Alphabet Inc., about 53% of the benchmark’s gains came from just five stocks.
So perhaps the Dow Jones Industrial Average’s new milestone this week was a more significant development because it is less heavily weighted toward those big tech giants, according to Dave Mazza, chief executive officer of Roundhill Investments.
“While the strength of the technology sector has been incredibly important in helping markets reach peak after peak, it is far from the only sector that is doing well,” he said. “While some pointed out last year that the market was too concentrated, the same cannot be said in 2024.”
European earnings surprise
European shares are also posting record gains as economic data shows signs of weakness amid positive surprises this year. This boosts corporate profits and encourages markets to continue their rally.
“The expected sluggish earnings season turned out better than feared,” said BNP Paribas strategists led by Georges Debbas, noting that three-quarters of European companies met or beat earnings expectations and margins improved. This strengthens analysts’ estimates of future earnings, sending shares higher.
The pan-European Stoxx 600 index has risen in five of the last six months, with diverging monetary policy from US policy likely to act as a tailwind for equities in the region. The European Central Bank has taken a more dovish tone than the Fed in recent months, and bond markets expect the ECB to cut rates ahead of its US counterpart for the first time.
While the gain has been largely concentrated in a few stocks, it has been expanding since February, with 16 stocks accounting for 50% of the Stoxx 600’s annual gain. The largest of these is Novo Nordisk A/S, which accounts for 10% of the Stoxx 600’s gain. In the year, GAME’s profit is 7.7% and 4.3%, respectively, and ASML Holding NV and SAP SE.
Commodity inventories rise
Britain’s FTSE 100 has outperformed the Euro Stoxx 50 in dollar terms over the past three months, recovering much of its year-to-date lows. Rising commodity prices have been a key factor in helping one of the world’s cheapest developed stock markets begin to catch up with its rivals.
The economically sensitive commodities sector also pushed Canada’s main stock benchmark, the S&P/TSX composite index, to a record high. Gold and copper have repeatedly set records this year, boosting the country’s huge mining sector, which accounts for more than 12% of the index’s weight.
“Precious metals prices are nearing 10-year highs set just a few weeks ago, which could support the Canadian index for now, although a reversal could spell trouble,” Bloomberg Intelligence analysts Gillian Wolf and Gina Martin Adams wrote in a note.
Japan is back
Japan’s Nikkei 225 is up 16% this year, adding to last year’s 28% gain. The country has attracted investors and made profits thanks to a campaign to boost shareholder returns, a weak yen and the end of negative rates in Japan.
Strategists at BlackRock Inc. believe that the fall of the yen could scare away foreign investors. But they also believe long-term prospects are good thanks to corporate reforms, domestic investment and rising wages.
India also performed well, with the S&P BSE Sensex setting records and beating China on the back of government investment promises and a growing economy. However, investors turned careful in recent weeks due to election uncertainty and high valuations.
Meanwhile, Australia’s S&P/ASX 200 index peaked on March 28 after inflation data confirmed bets that rates had peaked. Expectations have changed since then, with a former central bank official predicting the cuts might not happen until late 2025. However, Australian shares are again hovering near that all-time high.