MSCI World Index Hits Four-Day Record High on Easing Inflation, Rate Cut Hopes

The global stock market has been on a remarkable run, with the MSCI World Index, which tracks over 2,500 stocks worldwide, setting new records for four consecutive trading days. This surge is driven by what analysts are referring to as "animal spirits," fueled by easing inflation pressures, resilient corporate earnings, and optimistic expectations of an impending rate cut by the U.S. Federal Reserve.

The S&P 500 Index closed at a historic high for the second consecutive day on Wednesday, while major indices in Japan, South Korea, and Singapore also reached new all-time highs this week. The latest catalyst for this stock market rally is a weak U.S. Producer Price Index (PPI) report. The PPI for August unexpectedly fell by 0.1% month-over-month, significantly below the 0.3% increase anticipated by economists. This data suggests that inflationary pressures are easing, further boosting market expectations for a more accommodative monetary policy from the Federal Reserve.

The probability of a 25 basis point rate cut at the September 17 meeting is estimated to be around 92%, with some analysts predicting two rate cuts this year, with the September cut being almost certain. The strong economic fundamentals and resilient corporate earnings have also provided a solid foundation for the stock market rally. The market's resilience has exceeded expectations, driven by robust economic growth and strong corporate earnings. This has supported returns in global stock markets, including major markets in the U.S., Europe, and Asia.

The outstanding performance of a major tech company is a prime example. Following the release of optimistic forecasts related to artificial intelligence revenue, the company's stock price surged to a new all-time high on Wednesday, with its market capitalization increasing by 244 billion dollars in a single day, marking the best single-day performance since 1992. This performance has bolstered market confidence in the continued strength of the tech-led rally.

Despite the current optimism, some analysts caution about potential risks. Investors are closely monitoring the upcoming U.S. Consumer Price Index (CPI) data. If the CPI data also shows an unexpected decline, it could provide a "triple boost" for the Federal Reserve to implement more significant rate cuts, potentially driving the stock market to new heights. However, there are concerns that the impact of U.S. tariff policies, which only took effect in August, could become more apparent in the coming months, potentially cooling market sentiment.

Investors are advised to remain cautious as market risks persist. This article does not constitute personal investment advice and does not consider individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investing involves risk, and users are responsible for their own investment decisions.