Global Stock Market First Quarter: Best Start in Five Years, AI Booming, Japan Shining

Driven by the fervor for AI, global stock markets ended the first quarter strongly, achieving the best performance in five years.

In the first quarter, the MSCI global stock index rose by 7.7%, marking the largest quarterly increase since 2019. Looking at different regions, the S&P 500 hit a new high 22 times, while European stock indices such as Germany's DAX and France's CAC40 outperformed the S&P 500 in March. The Nikkei Index surged by 16.2% year-to-date, returning to its historical high in 1989.

NVIDIA remains the most dazzling star, with its market value soaring by over $1 trillion in three months, accounting for one-fifth of the total market value increase in the global stock market.

In other asset classes, stocks and bonds showed differentiation, with global bond markets declining and Bitcoin skyrocketing by over 60% in the first quarter.

Strong Performance in US Stocks

The main driving force behind the rise in global stock markets is the S&P 500, which hit a historical high 22 times in this quarter.

The AI frenzy has become a key force driving the stock market rally, with the "king of chips" NVIDIA seeing its market value soar by over $1 trillion in the first three months of this year, accounting for about one-fifth of the total global stock market value increase during the same period.

On one day in January, NVIDIA's market value increased by $277 billion, equivalent to the total market value of all listed companies in the Philippines.

As the stock market continues to rise strongly, concerns about a "bubble" are spreading, with some market observers comparing the current market situation to the disastrous end of the tech bubble in 2000.

Kristina Hooper, Chief Global Market Strategist at Invesco, pointed out:

This quarter has indeed been quite optimistic, with artificial intelligence bringing some heat, but the more fundamental reason is the relaxation of monetary policy and the unexpected resilience of the global economy.

Signs of resilience in the US domestic economy have boosted the stock market, despite unexpected inflation increases in January and February. Investors have lowered their expectations for six interest rate cuts this year, now aligning with the Fed's forecast, expecting three 25 basis point hikes. The prime rate is already at its highest level in twenty-three years.

The latest global fund manager survey by Bank of America Merrill Lynch shows that nearly two-thirds of respondents expect the US to avoid a recession in the next 12 months, compared to only around 10% at the beginning of the year. Most investors also believe that global corporate profits will grow in the medium term.

Strong Performance in Japanese and European Stocks

Not only in the US, the tech stock rally that initially started on Wall Street has gradually spread to Europe and Japan, among other regions The Japanese stock market leads the way, with the TOPIX index up 16.2% year-to-date, returning to its historical high set in 1989. The rise in chip stocks and increased confidence in the economic outlook have been the main drivers behind the sharp rise in the Tokyo stock market.

European stocks are performing well, with the UK's FTSE 100, Germany's DAX, France's CAC40, and Spain's IBEX35 indices outperforming the S&P 500 in March. As the crazy rally on Wall Street begins to slow down, indices in other regions and non-tech sectors are catching up with the early gains driven by AI in US stocks.

Amelie Derambure, a portfolio manager at asset management firm Amundi, commented:

Overall, the cooling of inflation has not raised concerns about an economic downturn, and the situation is positive. Economic weakness may not come soon, and we still have time to catch this wave of gains.

Amundi has moderately increased its equity allocations in Japan, Europe, and the United States since the beginning of the year.

Divergence between Stocks and Bonds, Bitcoin Surges

It is worth noting that the stock market surge occurred while bond yields were rising.

According to data from HSBC, the stock market has significantly outperformed the bond market, with the quarterly performance gap between the two reaching its largest since 2020.

Bitcoin surged in the first quarter, with a gain of 60% in the past three months, and its current total market value exceeds the GDP of approximately 150 countries.