Running of the bulls
Equity markets are flying globally, but is the exuberance justified?
It's been a week dominated by broken tax cut promises, the cost-of-living squeeze and Australia Day culture wars. But the bleak vibe enveloping the country has obscured another reality.
Equity markets are flying again in many major markets (besides China). This week, the US S&P 500 touched fresh record highs, the Nikkei 225 hit its highest levels since 1990, and overnight the Eurostoxx 50 index hit its best level since 2001. The ASX has not claimed a new milestone but is also only a smidgeon away from fresh record territory.
Markets are forward looking, and at the moment they are pricing in sunny times ahead.
Investors are betting that central banks will achieve the holy grail of a soft landing, with the inflation threat tamed, recessions avoided and rate cuts possible in the second half of the year. Money markets are pricing in as many as six rate cuts in the US in 2024, after the Fed in December signalled its pivot back from containing inflation.
