Global stock markets have recorded their strongest year since 2019, spurred by a notable rally in the last two months. The surge comes as investors anticipate an end to interest rate hikes and expect significant rate cuts in 2024.
The MSCI World index, a measure of global developed market equities, increased by 22% in 2023, marking its best performance in four years. The S&P 500 index, a key contributor, rose 24% over 2023, nearing its all-time high.
This positive trend in the stock market is attributed to changing expectations around interest rates, driven by faster-than-expected declines in Western inflation. The Federal Reserve’s indications of potential rate cuts in 2024 have further fueled this optimism.
In the bond market, the Bloomberg global aggregate index has recovered, rising 6% in 2023 after a previous downturn. Concurrently, the US 10-year Treasury yield has decreased, reflecting the broader easing of inflation.
Tech stocks have significantly driven Wall Street’s gains, with the Nasdaq Composite index up 43%, its best performance in two decades. In contrast, London’s FTSE 100 has lagged, rising less than 4% in 2023, impacted by its sector composition and persistent inflation concerns in the UK.
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