FX.co ★ Investors cheer stunning rally in global stocks

Global stock markets are overwhelmed by euphoria. Stock indices have hit historic records worldwide and are still extending their rally. Global stock indices have found support from benign economic conditions, particularly softening inflation.

Bloomberg reported that in the world’s twenty largest stock markets, 14 stock indices have notched their historic highs. On May 17, the global MSCI ACWI, which tracks the stocks in developed and emerging markets, soared to a record high. The S&P 500, the Nasdaq 100, and the Dow Jones Industrial Average printed their historic peaks in the US. The Dow Jones topped the 40,000 landmark for the first time ever. Apart from Wall Street, the key stock indices in Europe, Canada, Brazil, India, Japan, and Australia can boast of new highs.

This stunning rally was driven by the following factors: market expectations of rate cuts by major central banks, the green shoots of recovery in the global economy, and growth in corporate profits. Importantly, there are reserves worth $6 trillion in financial markets and a lack of grave risks, Bloomberg experts say. The rally in stock markets has been gathering pace on the back of favorable macroeconomic signals, Salman Ahmed, Global Head of Macro and Strategic Asset Allocation, commented on the sentiment of stock investors. Earlier, he scaled up the stock share in his investment portfolio.

A lot of analysts say that the hope for “a soft landing” in the US economy on the back of fading inflation accounts for the risk-on mood. In other words, investors cherish the hope of monetary easing by the Federal Reserve. The first rate cut is likely to happen this year.

Experts reckon that another catalyst for a surge in the benchmark stock indices is the hype about artificial intelligence. Growing popularity and high demand set the stage for the explosive jump in Nvidia, Microsoft, Amazon, and Alphabet shares.

However, not all analysts attribute the growth in global stock indices to AI success. Roundhill Investments CEO Dave Mazza thinks that the fact of the Dow Jones surpassing 40,000 points has nothing to do with artificial intelligence. He admits that overcoming this psychological level matters a lot to the index, but the Dow Jones does not greatly depend on high-tech giants.

Following a decline in April, global stock indices rebounded to their previous highs as the bulls rushed to buy stocks during a downward retracement. The S&P 500 has avoided a pullback of more than 2% and climbed to the strongest levels in the last 7 years. Remarkably, even China’s stock market recently clicked into gear. It got stuck in dire straits in 2022/24 after having reached a historic peak in 2021.