Equity benchmarks around the world are reaching new highs, fueled by hopes of easing inflation, robust earnings, and growing expectations of rate cuts in the U.S.
The MSCI All Country World Index, which follows over 2,500 stocks in developed and emerging markets, has registered four consecutive record closes, LSEG data show. In the United States, the S&P 500 closed at an all-time high on Wednesday, and Japan's Nikkei 225, South Korea's Kospi, and Singapore's Straits Times Index all hit record highs this week.
Analysts attribute the rally to a sharp turnaround from earlier this year when markets were buffeted by fears of inflation, tariffs, and geopolitical threats. "Year-to-date performance has really been premised on strong economic growth and, most importantly, corporate earnings," said Maybank's head of investment strategy Eddy Loh.
New U.S. figures have strengthened the argument for a monetary easing. Producer prices fell unexpectedly 0.1% in August, down from a 0.3% rise that was predicted, stoking speculation that the Federal Reserve will reduce interest rates at its Sept. 17 meeting. CME's FedWatch tool indicates a 92% chance of a quarter-point reduction.
"Stocks have reached new highs as a much lower-than-expected PPI painted deflation instead of anticipated inflation," said Interactive Brokers senior economist José Torres. "Animal spirits are running high because the highly-received print is supporting odds that the Fed will deliver reductions during each of its last three meetings in 2025."
Technology has also given a kickstart. Oracle jumped to an all-time record after foreseeing robust AI-related revenue, taking its market value by $244 billion, its largest one-day gain since 1992.
However, care is still needed. Maybank's Loh cautioned that U.S. tariffs, which were implemented in August, might dampen sentiment in the coming months. Investors are currently holding out for the next U.S. consumer price index reading, which might further influence the Fed's course of action.
