Global equities hit a record high for the first time since February, as signs of a resilient US economy overshadowed uncertainty around trade negotiations.
The MSCI All-Country World Index rose as much as 0.3% to 888.24 points, surpassing the previous high of 887.72 hit in February.
Its rebound from April lows has been helped by President Donald Trump’s softer tone on tariffs. Recession fears have also eased following a robust corporate earnings season in the US and Europe, while recent data show the US labor market remains healthy.
“Everybody was waiting for the US economy to break but the jobs data from yesterday demonstrates that it’s not,” said Benjamin Melman, chief investment officer at Edmond de Rothschild Asset Management.
Trade-related volatility has returned after Washington and Beijing accused each other of violating agreements. Trump said on social media that Chinese leader Xi Jinping was “extremely hard” to make a deal with, underscoring tensions between the world’s largest economies.
However, a strong first-quarter reporting season as well as renewed enthusiasm for artificial intelligence is driving flows into equities. Nvidia Corp. — a global bellwether for AI trends — is now the world’s biggest company by market value after it issued an upbeat outlook. The Bloomberg Magnificent Seven index has surged 30% since an April low, representing more than $3.5 trillion in additional market capitalization.
“There’s a high degree of consistency across a wide range of labor market indicators that the US economy is holding up well,” said Daniel Murray, chief executive officer of EFG Asset Management.
For Paolo Schiavone, a macro trader at Goldman Sachs Group Inc., a “powerful” combination of easing financial conditions and low real rates could propel economic growth. “Assuming that both remain accommodative, the mix can be an underestimated boost to growth,” he wrote in a note, adding that expectations of a near-term economic slowdown were likely misplaced.
International Boost
European stocks have been among the big winners this year following historic fiscal reform in Germany. Cheaper valuations have also attracted investors looking for alternatives to pricey US stocks. Germany’s DAX Index outperformed again on Wednesday as the country’s cabinet is set to pass a package of tax breaks for companies worth an estimated €46 billion ($52 billion).
The Stoxx Europe 600 Index has beaten the S&P 500 by a record 18 percentage points this year in dollar terms, according to data compiled by Bloomberg. Both gauges are more than 2% below peaks set earlier this year in local currencies.
“We’re still bullish on the European markets: there’s great visibility in terms of monetary policy when you compare them to other regions,” said Alexandre Hezez, chief investment officer at Group Richelieu, noting that Germany’s stimulus effort was helping drive growth. “The rising euro and the weakness of the dollar are a testimony of Europe’s new appeal.”
Still, some market participants warned the trade outlook remained a key risk for stocks, with many institutional investors reluctant to join in the rally.
“There are a lot of investors who are themselves puzzled by these indexes bouncing back to their historic highs,” said Roland Kaloyan, head of equity strategy at Societe Generale SA. “It’s really getting complicated for investors to position themselves given the lack of visibility, the uncertainty with markets fully valued.”
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